On January 1, 2013, a company issued and sold a $450,000, 7%, 10-year bond payable and...

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:

Expert Solution

The journal entry to record First interest payment:

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)

Working

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

ekkarill92 answered 2 years ago

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