Question

Paulson Company issues 10%, four-year bonds, on January 1 of this year, with a par value of $93,000 and semiannual interest payments.

Semiannual Period-End		Unamortized Discount			Carrying Value
(0)	January 1, issuance	$	6,593		$	86,407
(1)	June 30, first payment		5,769			87,231
(2)	December 31, second payment		4,945			88,055

Use the above straight-line bond amortization table and prepare journal entries for the following.

(a) The issuance of bonds on January 1.
(b) The first interest payment on June 30.
(c) The second interest payment on December 31.

Answer 1

Answer
Journal entry
DATE	GENERAL JOURNAL	DEBIT ($)	CREDIT ($)
01-Jan	Cash	$             86,407
	Discount on Bond Payable	$               6,593
	Bond Payable		$             93,000
	(To record issuance of bond)
June, 30	Bond interest expense	$               5,450
	Discount on Bond Payable		$                  800
	Cash		$               4,650
	(To record first interest paid)
December, 31	Bond interest expense	$               5,474
	Discount on Bond Payable		$                  824
	Cash		$               4,650
	(To record second interest paid)
				Working Note
June, 30	Discount on Bond Payable = $6593 – $5769 = $800
	Cash = $93000 × 10% × 1/2 = $4650
December, 31	Discount on Bond Payable = $5,769- $4945 = $824
	Cash = $93000 × 10% × 1/2 = $4,650