In: Accounting
On January 1, 2013, a company issued and sold a $450,000, 7%, 10-year bond payable and received proceeds of $445,500. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: |
Date |
General Journal |
Debit |
Credit |
30-Jun-13 |
Interest Expense |
$ 15,975 |
|
Discount on Bonds Payable |
$ 225 |
||
Cash [450000 x 7% x 6/12] |
$ 15,750 |
||
(first interest payment made) |
A |
Bonds Payable face Value |
$ 450,000 |
B |
Issue Price |
$ 445,500 |
C = A - B |
Discount on Bonds payable |
$ 4,500 |
D |
Term (years) |
10 |
E = D x 2 semi annual payments |
No. of interest payments |
20 |
F = C/E |
Straight Line amortisation of Discount |
$ 225 |