Question

Dobbs Company issues 9%, two-year bonds, on December 31, 2017, with a par value of $109,000 and semiannual interest payments.

Semiannual Period-End			Unamortized Discount			Carrying Value
(0)	12/31/2017		$	6,180		$	102,820
(1)	6/30/2018			4,635			104,365
(2)	12/31/2018			3,090			105,910
(3)	6/30/2019			1,545			107,455
(4)	12/31/2019			0			109,000

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

Required:
(a) The issuance of bonds on December 31, 2017.
(b) The first through fourth interest payments on each June 30 and December 31.
(c) Record the maturity of the bonds on December 31, 2019.

Answer 1

	Semi annual interest = ( $ 109,000 x 9% x 6/12 ) = $ 4,905
	Journal Entries
Date	Account's tittle	Debit $	Credit $
2017
31-Dec	Cash	102,820
	Discount on issue of Bond	6,180
	9%, 2-year Bond		109,000
	( issue of bond at a discount )
2018
30-Jun	Interest expenses ( $ 4,905 + $ 1,545 )	6,450
	Discount on issue of Bond		1,545
	Cash		4,905
	( semi annual interest and amortization of discount )
31-Dec	Interest expenses ( $ 4,905 + $ 1,545 )	6,450
	Discount on issue of Bond		1,545
	Cash		4,905
	( semi annual interest and amortization of discount )
2019
30-Jun	Interest expenses ( $ 4,905 + $ 1,545 )	6,450
	Discount on issue of Bond		1,545
	Cash		4,905
	( semi annual interest and amortization of discount )
31-Dec	Interest expenses ( $ 4,905 + $ 1,545 )	6,450
	Discount on issue of Bond		1,545
	Cash		4,905
	( semi annual interest and amortization of discount )
31-Dec	9%, 2-year Bond	109,000
	Cash		109,000
	( Maturity of Bond )