Paulson Company issues 9 fouryear bonds on December 31 2017

Paulson Company issues 9%, four-year bonds, on December 31, 2017, with a par value of $106,000 and semiannual interest paym ents. Semiannual Period-End Unamortized Discount (0) 12/31/2017 (1) 6/30/2018 (2) 12/31/2018 $6,853 5, 996 5,139 Carrying Value $ 99,147 100,004 100,861 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.

Solution

Journal entries Date Account titles & Explanations Debit Credit 12/31/2017 Cash 99,147 discount on bonds 6,853 Bonds payable 106,000 6/30/2018 interest expense 5627 Discount on bonds payable 857 cash (106000*4.5%) 4770 12/31/2018 interest expense 5627 Discount on bonds payable 857 cash (106000*4.5%) 4770