Question

On the first day of the fiscal year, a company issues an $370,000,10%, five-year bond that pays semiannual interest of $18,500($370,000×10%× 1/2 ), receiving cash of $347,800. Journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method. If an amount box does not require an entry, leave it blank.

Answer 1

To journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method, you would debit Interest Expense and Bond Discount, and credit Cash and Bond Interest Expense.

Step-by-step explanation:

To journalize the entry to record the first interest payment and the amortization of the related bond discount using the straight-line method, we need to understand the components of the entry. The first interest payment of $18,500 is recorded as a debit to Interest Expense and a credit to Cash. Then, the amortization of the bond discount is recorded as a debit to Bond Discount and a credit to Bond Interest Expense.

The journal entry would be:

1. Debit: Interest Expense $18,500
2. Credit: Cash $18,500
3. Debit: Bond Discount $2,200
4. Credit: Bond Interest Expense $2,200