Question

The Concord Company issued $260,000 of 11% bonds on January 1, 2020. The bonds are due January 1, 2025, with interest payable each July 1 and January 1. The bonds were issued at 98.

Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Concord Company records straight-line amortization semiannually.

Answer 1

Par value of bonds = $260,000

Cash receipts from issue of bonds = 260,000 x 98%

= $254,800

Discount on bonds payable = Par value of bonds - Cash receipts from issue of bonds

= 260,000 – 254,800

= $5,200

Journal

January 1, 2020	Cash	254,800
	Discount on bonds payable	5,200
	Bonds payable		260,000
June 30, 2020	Interest expense	14,820
	Discount on bonds payable		520
	Cash		14,300
Dec. 31, 2020	Interest expense	14,820
	Discount on bonds payable		520
	Interest payable		14,300

Semi annual interest payment = 260,000 x 11% x 6/12

= $14,300

Semi annual amortization of bond discount = 5,200/10

= $520

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