Question

Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.) Assumption 1. Seven-year bonds payable with face value of $85,000 and stated interest rate of 10%, paid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $85,000. Journalize the issuance of the bonds when the market interest rate is 10%. Date Accounts Debit Credit * More Info Seven-year bonds payable with face value of $85,000 and stated interest rate of 10%, paid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $85,000. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present value of the bonds at issuance is $77,074. Same bonds payable as in assumption 1, but the market interest rate is 8%. The present value of the bonds at issuance is $93,938. Print Done

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Answer 1

Journal Entries Date Account Title and Explaination Debit Credit Post. Ref. $ 85,000.00 Cash Bonds Payable (To record issue of Bonds at par) 85,000.00 77,074.00 7,926.00 Cash Discount on Bonds Payable Bonds Payable (To record issue of Bonds at Discount) 85,000.00 $ 93,938.00 A Cash Bonds Payable Premium on Bonds Payable (To record issue of Bonds at Premium) 85,000.00 8,938.00 A