Question

Paulson Company issues 9%, four-year bonds, on December 31, 2017, with a par value of $94,000 and semiannual interest payments. Semiannual Period-End (0) 12/31/2017 (1) 6/30/2018 (2) 12/31/2018 Unamortized Discount $6,613 5,786 Carrying Value $ 87,387 88,214 89,041 4.959 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on December 31, 2017 (b) The first interest payment on June 30, 2018 (c) The second interest payment on December 31, 2018

need help answering the questions above... thanks

Answer 1

Face Value of Bonds = $94,000
Issue Value of Bonds = $87,387

Discount on Bonds Payable = Face Value of Bonds - Issue Value of Bonds
Discount on Bonds Payable = $94,000 - $87,387
Discount on Bonds Payable = $6,613

Annual Coupon Rate = 9.00%
Semiannual Coupon Rate = 4.50%
Semiannual Coupon = 4.50% * $94,000
Semiannual Coupon = $4,230

Time to Maturity = 4 years
Semiannual Period = 8

Semiannual Amortization of Discount = Discount on Bonds Payable / Semiannual Period
Semiannual Amortization of Discount = $6,613 / 8
Semiannual Amortization of Discount = $827

Semiannual Interest Expense = Semiannual Coupon + Semiannual Amortization of Discount
Semiannual Interest Expense = $4,230 + $827
Semiannual Interest Expense = $5,057

Credit Debit 87,387 6,613 $ $ 94,000 5,057 Date General Journal Dec. 31, 2017 Cash Discount on Bonds Payable Bonds Payable June 30, 2018 Interest Expense Discount on Bonds Payable Cash Dec. 31, 2018 Interest Expense Discount on Bonds Payable Cash 827 4,230 5,057 827 4,230