Question

Learning Objectives 2,3 P14-33A Analyzing, journalizing, and reporting bond transactions Danny's Hamburgers issued 6%, 10-year bonds payable at 90 on December 31, 2018 At December 31, 2020, Danny reported the bonds payable as follows: 2. Discount 53,000 Long-term Liabilities: Bonds Payable Less: Discount on Bonds Payable $ 600,000 (48,000) $ 552,000 Danny's pays semiannual interest each June 30 and December 31. Requirements 1. Answer the following questions about Danny bonds payable: a. What is the maturity value of the bonds? b. What is the carrying amount of the bonds at December 31, 2020? c. What is the semiannual cash interest payment on the bonds? d. How much interest expense should the company record each year? 2. Record the June 30, 2020, semiannual interest payment and amortization of discount CHAPTER

Answer 1

1a) maturity value = $600000

1b) Carrying amount = $552000

1c) Semiannual Cash interest payment = 600000*3% = 18000

1d) Interest expense = 18000+3000 = $21000

2) Journal entry

Date	account and explanation	Debit	Credit
June 30	Interest expense	21000
	Discount on bonds payable (60000/10)*6/12		3000
	Cash (600000*6%*6/12)		18000