Question

Paulson Company issues 6%, four-year bonds, on January 1 of this year, 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 January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31. Semiannual Period-End Unamortized Discount Carrying Value (0) January 1, issuance ............. (1) June 30, first payment........... (2) December 31, second payment ... $13,466 11,782 10,098 $186,534 188,218 189,902

Answer 1

Journal Entries:-

(a) the issuance of Bonds on January 1

Particulars	Debit	Credit
Cash A/c Dr.	186,534
Discount on Bonds payable A/c Dr [Unamortized Discount]	13,466
To Bonds Payable		200,000

(b) the first interest payment on June 30

Particulars	Debit	Credit
Bond interest Expense A/c Dr.	7,684
To Discount on Bonds payable A/c [Unamortized Discount]		1,684
To Cash A/c		6,000

Note : Bond Interest Expense = [200000*6/100*6/12] + [13466-11782] = 7,684

(c) the second interest payment on December 31

Particulars	Debit	Credit
Bond Interest Expense A/c Dr.	7,684
To Discount on Bonds Payable A/c [Unamortized Discount]		1,684
To Cash A/c		6,000

Note : Bond Interest Expense = [200000*6/100*6/12] + [11782-10098] = 7,684