Question

Plymouth Corporation issued $200,000 of 9%, five-year bonds for 150,000 (bonds were issued at discount) on January 1, 2000.  Interest is paid semi-annually on January 1 and July 1. Plymouth Corporation uses the straight-line method of amortization.   Record the following transactions in the journal below

Transactions for 2000

Jan. 1         Issued $200,000 of 5-year, 9% bonds at $150,000.

Jul. 1         Recorded the interest payment.

Dec. 31      Recorded the accrued interest on the bonds.

Transactions for 2001

Jan. 1         Recorded the interest payment.

Jul. 1         Recorded the interest payment.

Dec. 31      Recorded the accrued interest on the bonds.

Date	Accounts	Debit	Credit

Answer 1

WORKING NOTES:
	CALCULATION OF SEMI ANNUALLY AMORTIZATION OF DISCOUNT
	Bonds Par Value	$2,00,000
	Less: Issued price	$1,50,000
	Discount value	$50,000
	Life of the Bond	5 Years
	Period in 5 years = 5 Years X 2	10 Periods
	Amortization of discount per period = $ 50,000 / 10	$5,000
	CALCULATION OF SEMI ANNUALLY INTEREST EXPENSES
	Par Value of the bond	$2,00,000
	Interest Expenses @ 9%	$18,000
	Interest Expenses semi annually = $ 18,000 / 2	$9,000
	Add: Disconuted value	$5,000
	Interest expenses per period	$14,000
SOLUTION:
Journal Entries
Transaction for 2000
Date	General Journal	Debit	Credit
Jan, 01	Cash	$1,50,000
	Discount on issuance of bond	$50,000
	Bond Payable		$2,00,000
July, 1	Interest Expenses	$14,000
	Discount on issuance of bond		$5,000
	Cash		$9,000
Dec, 31	Interest Expenses	$14,000
	Discount on issuance of bond		$5,000
	Interest Payable		$9,000
Transaction for 2001
Date	General Journal	Debit	Credit
Jan, 01	Interest Payable	$9,000
	Cash		$9,000
July, 1	Interest Expenses	$14,000
	Discount on issuance of bond		$5,000
	Cash		$9,000
Dec, 31	Interest Expenses	$14,000
	Discount on issuance of bond		$5,000
	Interest Payable		$9,000