Question

A company issues 9%, 10-year bonds with a face amount of $60,000 for $56,262 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 10%. Interest is paid semiannually on June 30 and December 31. Required: 1. & 2. Record the bond issue and first interest payment on June 30, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 1 2 > Record the bond issue. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2021 Record entry Clear entry View general journal

Answer 1

1.

Par value of bonds = $60,000

Cash received from issue of bonds = $56,262

Discount on issue of bonds = Par value of bonds - Cash received from issue of bonds

= 60,000-56,262

= $3,738

Date	General Journal	Debit	Credit
January 01, 2021	Cash	56,262
	Discount on bonds payable	3,738
	Bonds payable		60,000
	( To record the issuance of note at discount)

2.

Date	General Journal	Debit	Credit
June 30, 2021	Interest expense	2,813
	Discount on bonds payable		113
	Cash		2,700
	( To record interest payment)

Interest expense on June 30 , 2021 = Carrying value of bonds on January 1, 2021 x Market interest rate x 6/12

= 56,262 x 10% x 6/12

= $2,813

Semi annual interest payment = Par value of bonds x Stated interest rate x 6/12

= 60,000 x 9% x 6/12

= $2,700

Discount on bonds payable amortized on June 30, 2021 = Interest expense on June 30 , 2021- Semi annual interest payment

= 2,813-2,700

= $113

Kindly comment if you need further assistance. Thanks‼!