Question

Duval Co. issues four-year bonds with a $100,000 par value on January 1, 2019, at a price of $95,952. The annual contract rate is 7%, and interest is paid semiannually on June 30 and December 31. 1. Prepare a straight-line amortization table like Exhibit 14.7 for these bonds. 2. Prepare journal entries to record the first two interest payments. 3. Prepare the journal entry for maturity of the bonds on December 31, 2022 (assume semiannual interest is already recorded).

Answer 1

1)
	Bond Amortization Schedule (Straight-Line Amortization)
	Face Value			100000
	Bond Price			95952
	Total Discount			4048
	Coupon Interest Rate Per Period			3.50%
	Coupon Interest Per Period			3500
	Total Number Of Period			8
	Date	Cash Interest	Interest Expenses	Discount Amortized	Unamortized Discount	Carrying Value
	01-01-2019				$        4,048	$            95,952
	30-06-2019	$          3,500	$          4,006	$           506	$        3,542	$            96,458
	31-12-2019	$          3,500	$          4,006	$           506	$        3,036	$            96,964
	30-06-2020	$          3,500	$          4,006	$           506	$        2,530	$            97,470
	31-12-2020	$          3,500	$          4,006	$           506	$        2,024	$            97,976
	30-06-2021	$          3,500	$          4,006	$           506	$        1,518	$            98,482
	31-12-2021	$          3,500	$          4,006	$           506	$        1,012	$            98,988
	30-06-2022	$          3,500	$          4,006	$           506	$           506	$            99,494
	31-12-2022	$          3,500	$          4,006	$           506	$               -	$        1,00,000
	Total	$        28,000	$        32,048	$        4,048

2)	Journal Entries
	Date	Account Title	Debit	Credit
	01-01-2019	Cash	95952
		Discount On Bond	4048
		Bonds Payable		100000
		(to record issuance of bond )
	30-06-2019	Interest Expenses	4006
		Discount On Bond		506
		Cash		3500
		(to record interest)
	31-12-2019	Interest Expenses	4006
		Discount On Bond		506
		Cash		3500
		(to record interest)
3)	Date	Account Title	Debit	Credit
		Bond Payable	100000
		Cash		100000
		( to record redemption of bond)