Question

On january 1, 2005, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of 396,000. interest is payable each june 30 and december 31. the company uses the straight-line method to amortize the discount. the journal entry to record the first interest payment is:

Answer 1

cash = 7% x $400,000 x 1/2 = 0.07 x400,000 x 1/2 = 14000
The journal entry to record the first interest payment is;
Bond Interest Expense-----------14,200
Cash.........................................14,000
Discount on Bonds Payable....................200