A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Using the straight-line method, prepare the issuer's journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium. (Round amounts to the nearest whole dollar)

Question

Business

Agustin Tanner

22 February, 04:06

A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Using the straight-line method, prepare the issuer's journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium. (Round amounts to the nearest whole dollar)

+2

Answers (1)

Know the Answer?

Rhys Deleon · Answer 1

The Journal entries are as follows:

(1)

Cash A/c Dr. $484,087

Discount on Bonds Payable A/c Dr. $15913

To Bonds Payable (a liability account) $500,000

(To record the first semiannual interest payment)

Workings:

Discount on bonds = 500,000 - 484,087

= 15,913

2.

Bonds payable A/c Dr. $200,000

To Cash 200,000

(To record the amortization of any bond discount)