Question

QS 10-8 Recording bond issuance and discount amortization LO P2

Snap Company issues 13%, five-year bonds, on January 1 of this year, with a par value of $210,000 and semiannual interest payments.

Semiannual Period-End				Unamortized Discount			Carrying Value
(0)		January 1, issuance		$	7,200		$	202,800
(1)		June 30, first payment			6,480			203,520
(2)		December 31, second payment			5,760			204,240

Use the above bond amortization table and prepare journal entries to record (a) the issuance of bonds on January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31.

Journal 1: Record the issuance of the bond

Journal 2: Record the interest payment and amortization on June 30.

Journal 3: Record the interest payment and amortization on December 31.

Answer 1

Date	General Journal	Debit	Credit
Jan-01	Cash	202,800
	Discount on bonds payable	7,200
	Bonds Payable		210,000
	(To record issue of bonds)
Jun-30	Bond Interest Expense (Refer Note 1)	14,370
	Discount on bonds payable		720
	Cash		13,650
	Note 1 : Bond Interest Expense = [210000*13/100*6/12] + [7200-6480] = 14,370
Dec-31	Bond Interest Expense (Refer Note 2)	14,370
	Discount on bonds payable		720
	Cash		13,650
	Note 2 : Bond Interest Expense = [210000*13/100*6/12] + [6480-5760] = 14,370