Question

Knowledge Check 04 On December 31, 2015, Wintergreen, Inc., issued $150,000 of 7 percent, 10-year bonds at a price of 93.25. Wintergreen received $139,875 when it issued the bonds (or $150,000 x.9325). After recording the related entry, Bonds Payable had a balance of $150,000 and Discounts on Bonds Payable had a balance of $10,125. Wintergreen uses the straight-line bond amortization method. The first semiannual interest payment was made on June 30, 2016. Complete the necessary journal entry for June 30, 2016 by selecting the account names and dollar amounts from the drop- down menus. Date Account Title Debit Credit June 30 select select select select select select select select select-

Answer 1

Solution:

Date	Account Title	Debit	Credit
June. 30	Bond Interest Expense	$        5,756
	Discount on Bonds Payable ( $ 10125 /20 periods)		$           506
	Cash ($ 150000 * 7/100 * 6 Months/12 Months)		$        5,250
	( Being interest expense paid)

Notes:

1) Discount on bonds payable is amortization of discount i.e., ($ 10,125 / (10 years * 2)) (Semi Annual)

2) Interest Cash Payment = Par Value * Interest Rate * Semi Annual (6 / 12).