Question

Paulson Company issues 10%, four-year bonds, on December 31, 2017, with a par value of $102,000 and semiannual interest payments. Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2017 $ 6,773 $ 95,227 (1) 6/30/2018 5,926 96,074 (2) 12/31/2018 5,079 96,921 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on December 31, 2017. (b) The first interest payment on June 30, 2018. (c) The second interest payment on December 31, 2018.

Answer is complete but not entirely correct. Credit No 1 Date Dec 31, 2017 General Journal Cash Discount on bonds payable Bonds payable Debit 95,227 6,773 102,000 Jun 30, 2018 6,773 X Bond interest expense Discount on bonds payable Cash 847 5,926 3 Dec 31, 2018 4,927 X Bond interest expense Discount on bonds payable 847 4,080 X Cash

Answer 1

Answer

--The last two entries are wrong.

--remember, Straight Line method is being used, hence, interest expense, cash paid and discount amortised will all be the same in every entry.

Date	Accounts title	Debit	Credit
30-Jun-18	Bonds Interest Expense [5100 + 847]	$5,947
	Discount on Bonds Payable		$847
	Cash ( $102000 x 10% x 6/12)		$5,100
	(to record first interest)
31-Dec-18	Bonds Interest Expense	$5,947
	Discount on Bonds Payable		$847
	Cash ( $102000 x 10% x 6/12)		$5,100
	(to record first interest)