Question

Blossom Company issues $4000000, 10-year, 8% bonds at 94, with

interest payable annually on January 1, The straight-line method is
used to amortize bond discounts. Prepare the adjusted journal
entry

Answer 1

To prepare the adjusted journal entry for Blossom Company issuing $4,000,000, 10-year, 8% bonds at 94 with interest payable annually on January 1, you need to calculate the bond discount, determine the annual amortization amount, and record the adjusted journal entry.

Step-by-step explanation:

The adjusted journal entry for Blossom Company issuing $4,000,000, 10-year, 8% bonds at 94 with interest payable annually on January 1 can be prepared as follows:

1. First, calculate the bond discount by multiplying the face value of the bonds by the discount rate. In this case, the bond discount is $4,000,000 x (100% - 94%) = $240,000.
2. Next, determine the annual amortization amount by dividing the bond discount by the number of years. In this case, the annual amortization amount is $240,000 / 10 = $24,000.
3. Then, record the adjusted journal entry on the annual interest payment date. Debit the Amortization of Bond Discount account for $24,000 and credit the Discount on Bonds Payable account for $24,000.