Question

Legacy issues $325,000 of 5%, four-year bonds dated January 1, 2013, that pay interest semiannually on June 30 and December 31. They are issued at $292,181 and their market rate is 8% at the issue date. 3. Prepare a straight-line amortization table for the bonds' first two years. Semiannual Period-End Unamortized Discount Carrying Value 01/01/2013 $32,819 $292,181 06/30/2013 29,257 12/31/2013 06/30/2014 12/31/2014

4.	Prepare the journal entries to record the first two interest payments.
	No Date General Journal Debit Credit 1 Jun 30, 2013 Bond interest expense Discount on bonds payable Cash

Answer 1

Prepare a straight-line amortization table for the bonds' first two years.
Semiannual Period-End	Amortiszed discount	Unamortized Discount	Carrying Value
1/1/2013		$32,819.00	$292,181.00
6/30/2013	$4,102.38	$28,716.63	$296,283.38
12/31/2013	$4,102.38	$24,614.25	$300,385.75
6/30/2014	$4,102.38	$20,511.88	$304,488.13
12/31/2014	$4,102.38	$16,409.50	$308,590.50
	Journal entries
Date	Particulars	Debit	Credit
30-Jun-13	Bond interest expense (325,000*5%*6/12)	$8,125.00
	Discount on bond amortization	$4,102.38
	To Discount on bonds payable		$4,102.38
	To Cash		$8,125.00
Date	Particulars	Debit	Credit
31-Dec-13	Bond interest expense (325,000*5%*6/12)	$8,125.00
	Discount on bond amortization	$4,102.38
	To Discount on bonds payable		$4,102.38
	To Cash		$8,125.00