3 On the first day of the current fiscal year 1500000 of 10y

3. On the first day of the current fiscal year, $1,500,000 of 10-year, 8% bonds, with interest payable miannually, were sold for $1,225,000. Present entries to record the following transactions for the current fiscal year: Issuance of the bonds. First semiannual interest payment (record as separate entry from discount amortization) Amortization of bond discount for the year, using the straight-line method of amortization. (a) Post. Ref. Debit Credit Date Description

Solution

A)

Cash. $1225,000
Discount on Bonds Payable . $275,000

Bonds Payable. $1,500,000
(b)
Interest Expense . $60,000
Interest Payable . $60,000
(c)
Interest Expense. $27,500
Discount on Bonds Payable. $27,500