Question

$480,000, 9%, 20-year bonds on January 1, 2020, for $439,135. effective-interest rate of 10% on the bonds which payable annually on January 1. Monty uses the effective-interest method to amortize bond premium or discount.

A) use the effective-interest method to amortize bond prem/disc.

record issuance on bond.

Jan 1 2020

cash -

Discount on bonds payable-

bonds payable-

B) Record accrual of interest/ discount amortization Dec31,2020

Dec 31

Interest expense -

discount on bonds payable -

interest payable -

C) Record interest on Jan012021

Jan 1,2021

Interest payable -

cash -

Answer 1

Date	Accounts and explanation	Debit(in $)	Credit(in $)
Jan 1,2020	Cash	439135
	Discount on Bond Payable	40865
	Bond Payable		480000
	(to bond issued at discount)
Dec 31,2020	Interest expenses($439,135*10%)	43914
	Discount on Bond Payable		714
	Interest payable($480,000*9%)		43200
	(to interest accrued for 2020)
Jan 1,2021	Interest payable	43200
	Cash		43200
	(to interest paid for 2020)