Question

Show Me How bn the first day of the fiscal year, a company issues a $6,000,000,796, 8-year bond that pays semiannual interest of $210,000 ($6,000,000 x 796 x %), receiving cash of $5,325,959 Journalize the bond issuance. If an amount box does not require an entry, leave it blank. Cash plecaunt on Bones parabie

Answer 1

Issuing Bonds at Discount

Accounts Tittles and explanations	Debit ($)	Credit ($)
Cash A/c	53,25,959
Discount on Bonds Payable A/c [$60,00,000 - $53,25,959]	6,74,041
To Bond Payable A/c		60,00,000
[Journal entry to record the Issue of Bond at discount]

Discount Amortization

Accounts Tittles and explanations	Debit ($)	Credit ($)
Interest Expenses A/c	3,72,740
To Discount on Bond Payable A/c		37,240
To Cash A/c		3,35,500
[Journal entry to record the first interest payment and amortization of the discount]

Discount on Bond Payable = $ 5,95,833 [$61,00,000 - $55,04,167]

Discount Amortization for 6 months = $37,240 [$5,95,833 / 16 Periods]

Cash Paid = $335,500 [$61,00,000 x 11% x ½]

Issuing Bonds at Premium

Account Titles and Explanation	Debit ($)	Credit ($)
Cash A/c	73,84,744
To Bond Payable A/c		64,00,000
To Premium on Bond Payable A/c [$64,00,000 -$73,84,744]		9,84,744
[Journal entry to record the Issue of Bond at Premium]

Premium Amortization

Account Titles and Explanation	Debit ($)	Credit ($)
Interest Expenses A/c	2,93,616
Premium on Bond Payable A/c	26,384
To Cash A/c		320,000
[Journal entry to record the first interest payment and amortization of the premium]

Premium on Bond Payable = $ 2,11,069 [$66,11,069 - $64,00,000]

Premium Amortization for 6 months = $26,384 [$211,069 / 8 Periods]

Cash Paid = $320,000 [$64,00,000 x 10% x ½]

Interest Expenses = $293,616 [$320,000 - $26,384]