On December 31, 2017, Blair Company issued $600,000 of 20‑year, 11 percent bonds payable for $554,861, yielding an effective interest rate of 12 percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2018, and (c) the semiannual interest payment and discount amortization on December 31, 2018. Round amounts to the nearest dollar.

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Landry

10 October, 04:22

On December 31, 2017, Blair Company issued $600,000 of 20‑year, 11 percent bonds payable for $554,861, yielding an effective interest rate of 12 percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2018, and (c) the semiannual interest payment and discount amortization on December 31, 2018. Round amounts to the nearest dollar.

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Jason Trevino · Answer 1

No Account and explanation Debit Credit

Dec 31 Cash 554861

Discount on bonds payable 45139

Bonds payable 600000

(To record issuance of bonds)

June 30 Bond interest expense 33292

(554861*12%*6/12)

Discount on bonds payable 292

Cash (600000*11%*6/12) 33000

(To record first semiannual interest)

Dec 31 Bond interest expense 33309

(555153*12%*6/12)

Discount on bonds payable 309

Cash 33000

(To record interest)