Question

Presented below is a partial amortization schedule for Discount Pizza. (1) (3) (5) (2) Cash Paid for Interest (4) Increase in Carrying Value Interest Expense Period Issue date Carrying Value $51,092 51,230 51,373 $1,650 1,650 $1,788 1,793 $138 143 2 Required: 1. & 2. Record the bond issue and first interest payment assuming the face amount of bonds payable is $55,000. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet

Answer 1

Solution:

Face amount of bonds payable = $55,000

Issue Price of bonds = $51,092

Discount on Issuance of bonds payable = $55,000 - $51,092 = $3,908

Journal entry to record the bond issue and first interest payment

General Journal	Debit	Credit
Cash	$51,092
Discount on Bonds Payable (bal fig)	$3,908
Bonds Payable		$55,000
(To record the issuance of bonds at discount)
Interest Expense	$1,788
Interest Payable or Cash Interest		$1,650
Discount on Bonds Payable (Amortization)		$138
(To record first interest payment)