Homework SoursePaulson Company issues 6 fouryear bonds on December 31 2017
Paulson Company issues 6%, four-year bonds, on December 31, 2017, with a par value of $100,000 and semiannual interest payments.
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.
Record the issue of bonds with a par value of $100,000 cash December 31, 2017.
Record the interest payment and amortization on June 30, 2018.
Record the interest payment and amortization on December 31, 2018.
| Semiannual Period-End | Unamortized Discount | Carrying Value | ||||||
| (0) | 12/31/2017 | $ | 6,733 | $ | 93,267 | |||
| (1) | 6/30/2018 | 5,891 | 94,109 | |||||
| (2) | 12/31/2018 | 5,049 | 94,951 | |||||
Solution
The following are the required journal entries:
note: cash paid towards interest every semi annual period = $100,000* 6% *1/2 =>$3,000.
interest expense = cash paid + discount on bondspayable written off.
2. entry on june 30:
3.second interest payment on december 31,2018.
| date | general journal | Debit | Credit |
| a. | cash a/c....(carrying value) | $93,267 | |
| Discount on bonds payable a/c.....(unamortised discount) | $6,733 | ||
| ............To bonds payable a/c.....(face value) | $100,000 | ||
| (being bonds payable issued for 93,267) |
