Homework Answers
Par value = 600,000
Sold value = 592,000
Discount on issue = 8,000
Life of the bond = 10 years, but interest is paid semi annually, amortization = 10 * 2 = 20
Periodic amortization = 8000 / 20 = 400
The interest payment = 600,000 * 6% * 1/2 = 18000
A journal entry to record the interest expenses should include the amortization expenses = 400
Interest expenses ............................... 18,400
........ Cash ...................................................................18,000
........ Discount on issue of bonds ......................................400
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