Question

PROBLEM Builders Corp issues $200,000 of its 10%, five-year bonds that pay interest semiannually when the market rate is 10% on January 1, 2017 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 Carrying Amount 3. Complete Builders Corp's Bonds Payable Amortization Schedule below. Cash Interest Discount/Premium Paid Expense Amortized 01/01/2017 06/30/2017 12/31/2017 $200,000 2 Page

Answer 1

1.

Date	Account Titles and Explanation	Debit	Credit
January 1, 2017	Cash	$200,000
	Bonds payable		$200,000

2.

Semi annual interest payment = 200,000 x 10% x 6/12

= $10,000

Date	Account Titles and Explanation	Debit	Credit
June 30, 2017	Interest expense	$10,000
	Cash		$10,000

3.

	Cash Paid	Interest Expense	Discount/Premium Amortized	Carrying Amount
01/01/2017	0	0	0	$200,000
06/30/2017	10,000	10,000	0	$200,000
12/31/2017	10,000	10,000	0	$200,000
06/30/2018	10,000	10,000	0	$200,000
12/31/2018	10,000	10,000	0	$200,000
06/30/2019	10,000	10,000	0	$200,000
12/31/2019	10,000	10,000	0	$200,000
06/30/2020	10,000	10,000	0	$200,000
12/31/2020	10,000	10,000	0	$200,000
06/30/2021	10,000	10,000	0	$200,000
12/31/2021	10,000	10,000	0	$200,000

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