Question

Exercise 10-6 Straight-Line: Recording bond issuance and discount amortization LO P2

Dobbs Company issues 5%, two-year bonds, on December 31, 2019, with a par value of $105,000 and semiannual interest payments.

Semiannual Period-End			Unamortized Discount			Carrying Value
(0)	12/31/2019		$	6,100		$	98,900
(1)	6/30/2020			4,575			100,425
(2)	12/31/2020			3,050			101,950
(3)	6/30/2021			1,525			103,475
(4)	12/31/2021			0			105,000

Use the above straight-line bond amortization table and prepare journal entries for the following.

Required:
(a) The issuance of bonds on December 31, 2019.
(b) The first through fourth interest payments on each June 30 and December 31.
(c) Record the maturity of the bonds on December 31, 2021.

Answer 1

(a)

Date	Account Titles	Debit	Credit
2019
Dec-31	Cash	$           98,900
	Discount on Bonds Payable	$             6,100
	Bonds Payable		$     1,05,000

(b)

Date	Account Titles	Debit	Credit
2020
Jun-30	Interest Expense	$             4,150
	Cash		$           2,625
	Discount on Bonds Payable		$           1,525
Dec-31	Interest Expense	$             4,150
	Cash		$           2,625
	Discount on Bonds Payable		$           1,525
2021
Jun-30	Interest Expense	$             4,150
	Cash		$           2,625
	Discount on Bonds Payable		$           1,525
Dec-31	Interest Expense	$             4,150
	Cash		$           2,625
	Discount on Bonds Payable		$           1,525

(c)

Date	Account Titles	Debit	Credit
Dec-31	Bonds Payable	$        1,05,000
	Cash		$     1,05,000