Question

PROBLEM 3: Builders Corp issues $200,000 of its 9%, five-year bonds that pay interest semiannually when the market rate is 10% on January 1, 2017. The market price of the Bond is $192,298 Required: 1 Journalize the issuance of the bond. Date Accounts and Explanation 2. Journalize Builders Corp's first semiannual interest payment. Date Accounts and Explanation Debit Credit 3. Complete Builders Corp's Bonds Payable-Discount Amortization Schedule below. Cash Interest Discount Carrying Amount Paid Expense Amortized 01/01/2017 06/30/2017 12/31/2017 3 Page

Answer 1

Answer to Requirement 1. Credit Date 01/01/2017 Accounts and Explanation Cash Discount on Bonds Payable Bonds Payable (To record Issuance of the bond) Debit 192,298 7,702 200,000 Answer to Requirement 2. Credit Date 06/30/2017 Debit 9,615 Accounts and Explanation Interest Expense Cash Discount on Bonds Payable (To record first semi-annual interest payment) 9,000 615

Answer to Requirement 3.

Discount Amortized Cash Paid Interest Expense Date 01/01/2017 06/30/2017 12/31/2017 06/30/2018 12/31/2018 06/30/2019 12/31/2019 06/30/2020 12/31/2020 06/30/2021 12/31/2021 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,000 9,615 9,646 9,678 9,712 9,747 9,785 9,824 9,865 9,908 9,954 615 646 678 712 747 785 824 865 908 922 Carrying Amount 192,298 192,913 193,559 194,236 194,948 195,696 196,480 197,305 198,170 199,078 200,000