Question

On the first day of the fiscal year, a company issues a $7,900,000, 9%, 5-year bond that pays semiannual interest of $355,500 ($7,900,000 × 9% × ½), receiving cash of $7,304,529.

Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

	Interest Expense
	Discount on Bonds Payable
	Cash

Answer 1

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Answer Journal Entry General Journal Debit ($) Credit ($) 415,047 Interest Expense Amortization of Bond Discount Cash 59,547 355,500 Discount on bonds = 7,900,000 - 7,304,529 $ 595,471 Amortisation of Bond Discount on first interest payment 595,471 / 10 59,547 Rounded off Number of payments = Number of years * 2 5* 2 10 Interest Expense = 59,547 +355,500 415,047