Question

On January 1, 2020, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,231, and pay interest each July 1 and January 1. JWS uses the effective-interest method.

Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 8%.(Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Solution:

Journal Entries - JWS Corporation
Date	Particulars	Debit	Credit
1-Jan-20	Cash Dr	$559,231.00
	Discount on bond payable Dr	$40,769.00
	To Bond Payable		$600,000.00
	(To record issue of bond)
1-Jul-20	Interest Expense Dr ($559,231*8%*6/12)	$22,369.00
	To Discount on bond payable		$1,369.00
	To Cash ($600,000*7%*6/12)		$21,000.00
	(Being first semiannual interest payment made and discount amortized)
31-Dec-20	Interest Expense Dr [($559,231 + $1,369)*4%]	$22,424.00
	To Discount on bond payable		$1,424.00
	To Interest payable		$21,000.00
	(Being first semiannual interest accrued and discount amortized)