Question

On Jan 1 2016, Acme2 sold a 5 year $100,000 zero coupon bond to Presto for $283,715 Yielding Presto 12% p.a. Journalize the Bond Sale for Acme2. Jan 1 Bond Sale Dr. Journalize the year-end adjusting Dec 31 Adjusting Entry

Answer 1

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Acme 2	(Correction: Bond is of 500,00 not of $100,000)
Date	Account	Debit	Credit
Jan 1	Cash	$     283,715
	Discount on Bond Payable	$     216,285
	Bond Payable		$   500,000
	(To record issuance of bond)
	Calculation proof:
	PV(0.12,5,,1,0)	$            0.57
	$500,000*$0.57	$     283,713
Date	Account	Debit	Credit
Dec 31	Interest Expense	34,045.80
	Interest Payable		$      34,046
	(To record interest expense) $283,715*12%
Acme 1
Date	Account	Debit	Credit
Jan 1	Cash	$     160,985
	Discount on Bond Payable	$     339,015
	Bond Payable		$   500,000
	(To record issuance of bond)
	Calculation proof:
	PV(0.12,10,,1,0)	$            0.32
	$500,000*$0.32	$     160,987
Date	Account	Debit	Credit
Dec 31	Interest Expense	19,318.20
	Interest Payable		$      19,318
	(To record interest expense) $160,985*12%