Question

Paulson Company issues 10%, four-year bonds, on January 1 of this year, with a par value of $93,000 and semiannual interest payments.

Semiannual Period-End		Unamortized Discount			Carrying Value
(0)	January 1, issuance	$	6,593		$	86,407
(1)	June 30, the first payment		5,769			87,231
(2)	December 31, second payment		4,945			88,055

Use the above straight-line bond amortization table and prepare journal entries for the following.

(a) The issuance of bonds on January 1.
(b) The first interest payment on June 30.
(c) The second interest payment on December 31.

Answer 1

Journal

Date	Account Title and Explanation	Debit	Credit
Jan 1	Cash	86,407
	Discount on bonds payable	6,593
	Bonds payable		93,000
	(To record issue of bonds)
June 30	Interest expense	5,474
	Discount on bonds payable		824
	Cash		4,650
	(To record interest expense)
Dec 31	Interest expense	5,474
	Discount on bonds payable		824
	Cash		4,650

Semiannual interest payment = Par value of bonds x Interest rate x 6/12

= 93,000 x 10% x 6/12

= $4,650

Semiannual amortization of bonds discount = 6,593/8

= $824

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