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Fish All Day, LLC issues 8%, 20-year bonds with a par value of $500,000 on January...

Fish All Day, LLC issues 8%, 20-year bonds with a par value of $500,000 on January 2 when the market rate is 9%. The company pays interest semi-annually on June 30 and December 31. Fish All Day, LLC received $480,000 at issuance. Prepare the journal entries to record the issuance of the bond and the first interest payment using straight-line amortization. (Round to the dollar) (23 points)

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Answer #1

Journal entry

Date account and explanation Debit Credit
Jan 2 Cash 480000
Discount on bonds payable 20000
Bonds payable 500000
(To record bond issue)
June 30 Interest expense 20500
Discount on bonds payable (20000/40) 500
Cash (500000*8%*6/12) 20000
(To record interest)
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