Question

Bonds Payable Journal Entries; Effective Interest Amortization
On December 31, 2017, Blair Company issued $600,000 of 20‑year, 11 percent bonds payable for $554,861, yielding an effective interest rate of 12 percent. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2018, and (c) the semiannual interest payment and discount amortization on December 31, 2018. Round amounts to the nearest dollar.

General Journal
Date	Description	Debit	Credit
a.)
Dec.31	Cash
	To record issuance of bonds.
b.)
Jun.30
	Cash
	To record semiannual interest payment and discount amortization.
c.)
Dec.31
	Cash

Answer 1

a
Dec 31	Cash	554861
	Discount on Bonds payable	45139
	Bonds payable		600000
	To record issuance of bonds.
b
Jun 30	Bond interest expense	33292		=554861*12%/2
	Discount on Bonds payable		292
	Cash		33000	=600000*11%/2
	To record semiannual interest payment
c
Dec 31	Bond interest expense	33309		=(554861+292)*12%/2
	Discount on Bonds payable		309
	Cash		33000	=600000*11%/2