Question

On the first day of the fiscal year, a company issues an $949,000, 9%, five-year bond that pays semiannual interest of $42,705 ($949,000 x 9% x 1/2), receiving cash of $892,100. 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

Bond issue price $892,100

Face value $949,000

Discount on bond $56,900

Number of Interest payments (10 years x 2) 10

Discount to be amortized per payment $5,690

Interest on bond $51,210

Date Description Debit Credit

Dec. 31 Bond interest expense $56,900

Discount on bonds payable $5,690

Cash $51,210

(Interest on bond paid and Premium amortized)