Question

On the first day of the fiscal year, a company issues a $3,200,000, 9%, 10-year bond that pays semiannual interest of $144,000 ($3,200,000 × 9% × ½), receiving cash of $2,649,441.

Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Answer 1

General Journal	Debit ($)	Credit ($)
Bond Interest Expense A/c [$27,528 + $144,000]	171,528
To Discount on Bonds Payable A/c [($3,200,000 - $2,649,441) / (10 Years x 2)]		27,528
To Cash A/c [$3,200,000 x 9.00% x 1/2]		144,000
[Entry to record the first interest payment and the amortization of the related bond discount]
Calculations
Discount on Bonds Payable = $27,528 [($3,200,000 - $2,649,441) / (10 Years x 2)]
Cash paid = $144,000 [$3,200,000 x 9.00% x 1/2]
Bond Interest Expense = $171,528 [$27,528 + $144,000]