Question

Dobbs Company issues 5%, two-year bonds, on December 31, 2019, with a par value of $200,000 and semiannual interest payments. Use the following bond amortization table and prepare journal entries to record (a) the issuance of bonds on December 31, 2019; (b) the first through fourth interest payments on each June 30 and December 31; and (c) the maturity of the bonds on December 31, 2021. Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2019 ................... (1) 6/30/2020 ...... (2) 12/31/2020 ....... (3) 6/30/2021 .............. (4) 12/31/2021 $12,000 9,000 6,000 3,000 $188,000 191,000 194,000 197,000 200,000

Answer 1

Answer (a) :-

When bonds are issued at the price less than its par value, then it is termed as bonds issued at discount.Discount on bonds is the difference between the par value and issue value.

Date	Account Title	Amount Debit(S)	Amount Credit(S)
31st Dec'19	Cash A/c Dr	188,000
	Discount on bonds payable A/c	12,000
	To Bonds Payable		200,000
	(Being bold sold at discount)

Answer (b) :- Interest payment on 30th June & 31st December

30th Jun'20	Bonds Interest expense a/c dr	8,000
	To Discount on bonds payable A/c		3,000
	(12,000-9000)
	To Cash A/c(200,000*5%*1/2)		5,000
	(Being semiannual interest & amortization)
31st Dec'20	Bonds Interest expense a/c dr	8,000
	To Discount on bonds payable A/c
	(6000-3000)		3,000
	To Cash A/c(200,000*5%*1/2)		5,000
	(Being semiannual interest & amortization)
30th Jun'21	Bonds Interest expense a/c dr	8,000
	To Discount on bonds payable A/c		3,000
	(3000-0)
	To Cash A/c(200,000*5%*1/2)		5,000
	(Being semiannual interest & amortization)

Answer (c):- The maturity of the bonds as on 31st December 2021

31st Dec'21	Bonds payable A/c dr	200,000
	To Cash A/c		200,000
	(Being Payment of bonds on maturity)