Question

The Pearl Company issued $310,000 of 10% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds were issued at 96. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Pearl Company records straight-line amortization semiannually. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.)

Answer 1

Requirement A

Date	Accounts titles	Debit	Credit
1-Jan-17	Cash	$        297,600
	Discount on Bonds Payable	$          12,400
	Bonds payable		$        310,000
	(Issue of bonds at $96 each))

Requirement b

1-Jul-17	Interest expense	$ 16,740
	Discount on Bonds Payable		$            1,240
	Cash		$ 15,500
	(Interest on bond)

Requirement c

31-Dec-17	Interest expense	$ 16,740
	Discount on Bonds Payable		$            1,240
	Interest payable		$ 15,500
	(Interest on bond)

Working

Face value of bond	$ 310,000.00
Issue price of Bond (310000/100*96)	$ 297,600.00
Discount on bond	$    12,400.00
Term of bond (in years)	5
Discount on bond amortized per year (12400/5)	$      2,480.00
Amortization for half year	$      1,240.00
Interest on bond for year(310000 x 10%)	$    31,000.00
Interest for half year	$    15,500.00