Question

Alexander Company issued $100,000, 8%, 10-year bonds payable at 96 on January 1, 2018. 6. Journalize the issuance of the bonds payable on January 1, 2018. 7. Journalize the payment of semiannual interest and amortization of the bond discount or premium (using the straight-line amortization method) on July 1, 2018. 8. Assume the bonds payable was instead issued at 108. Journalize the issuance of the bonds payable and the payment of the first semiannual interest and amortization of the bond discount or premium. (Record debits first, then credits. Select explanations on the last line of the journal entry.)

Answer 1

Issue Price of Bond =1,000*$96 =$96,000
Discount on issue of Bond =$100,000-$96,000 =$4,000
Interest paid in cash at each periiod =$100,000*8%*6/12 =$4,000
Discount amortization at each period =$4,000/20 =$200
Interest expense =$4,000+$200 =$4,200
Date	Accounts and explanation	Debit(in $)	Credit(in $)
Jan 1,2018	Cash	96000
	Discount on Bonds Payable	4000
	Bonds Payable		100000
July 1,2018	Interest expenses	4200
	Discount on Bonds Payable		200
	Cash		4000
Issue Price of Bond =1,000*$108 =$108,000
Premium on issue of Bond =$108,000-$100,000 =$8,000
Interest paid in cash at each periiod =$100,000*8%*6/12 =$4,000
Discount amortization at each period =$8,000/20 =$400
Interest expense =$4,000-$400 =$3,600
Date	Accounts and explanation	Debit(in $)	Credit(in $)
Jan 1,2018	Cash	108000
	Premium on Bonds Payable		8000
	Bonds Payable		100000
July 1,2018	Interest expenses	3600
	Premium on Bonds Payable	400
	Cash		4000