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29 March, 10:38

On the first day of the fiscal year, a company issues an $380,000, 7%, 5-year bond that pays semiannual interest of $13,300 ($380,000 * 7% * 1/2), receiving cash of $357,200. Required: Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method. Refer to the Chart of Accounts for exact wording of account titles.

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  1. 29 March, 11:07
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    the journal entry used to record the issuance of the bonds is:

    January 1, $380,000 in bonds payable issued

    Dr Cash 357,200

    Dr Discount on bonds payable 22,800

    Cr Bonds payable 380,000

    since the discount will be amortized using the straight line method, the $22,800 must be divided by 10 (10 semiannual payments) = $2,280

    the journal entry required to record the first coupon payment is:

    June 30, first interest payment on bonds payable

    Dr Interest expense 15,580

    Cr Cash 13,300

    Cr Discount on bonds payable 2,280
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