In: Accounting
On Jan 1, 2012, Roger Company issued $2,000,000, 9%, 5-year bonds dated Jan 1, 2012, at 97. The bonds pay semiannual interest on Jan 1 and July 1. The company uses the straight-line method of amortization and has a calendar year-end.
Prepare all the journal entries on the dates Jan 1 and July 1.
Transaction Date | Description | Debit | Credit |
01-Jan-12 | Cash | $ 19,40,000 | |
Discount on Bonds payable | $ 60,000 | ||
Bonds payable | $ 20,00,000 | ||
(Issue of bonds ) | |||
01-Jul-12 | Bond interest expense | $ 96,000 | |
Discount on Bonds payable | $ 6,000.00 | ||
Cash | $ 90,000 | ||
(Interest on bond paid and Discount amortized) |
Working
Bond issue price (2000000/100 x 97) | $ 19,40,000.00 |
Face value | $ 20,00,000.00 |
Discount on Bonds payable | $ 60,000.00 |
Number of Interest payments (5 years x 2) | 10 |
Discount to be amortized per year | $ 6,000.00 |
Interest on bond | $ 90,000.00 |
Interest expense to be recorded (90000+6000) | $ 96,000.00 |