Brief Exercise 146 On January 1 2017 Coronado Corporation is

Brief Exercise 14-6 On January 1, 2017, Coronado Corporation issued $640,000 of 9% bonds, due in 8 years. The bonds were issued for $605,318, and pay interest each July 1 and January 1. Coronado uses the effective-interest method. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 10%.

Solution

1-Jan Cash 605318 Discount on bonds payable 34682        Bonds payable 640000 1-Jul Interest expense 30266 =605318*10%/2       Discount on bonds payable 1466       Cash 28800 =640000*9%/2 31-Dec Interest expense 30339 =(605318+1466)*10%/2       Discount on bonds payable 1539       Interest payable 28800