Question

2. On May 1, Mason Company issued $3,500,000,6% bonds for face value plus including accrued interest. Interest is payable semiannually on January 1 and July 1. Prepare the journal entries to record the May 1 bond issue and the July 1 interest payment (2 points) Date Account Titles Debit Credit 3. Greer Industries issued $6,000,000 of 6% debentures on May 1, 2019 and received cash totaling $5,513,346. The bonds pay interest semiannually on May 1 and November 1. The firm uses the effec- tive-interest method of amortizing discounts and premiums. The bonds were sold to yield an effective interest rate of 8% Complete the following table indicating the total dollar amount of discount or premium amortization during the first year these bonds were outstanding. Show computations and round to the nearest dol- lar. (2 points) Amortization Table Carrying value Cash paid (A) Interest Expense (B) Amortization (A-B) Date November 1 May I

Answer 1

Q 2:

Journal Entries:

Date	Account title and Explanation	Debit	Credit
May 1	Cash	$3,587,500
	Bonds payable		$3,500,000
	Interest payable [3,500,000 x 6% x 5/12]		$87,500
	[To record issuance of bonds plus accrued interest]
July 1	Interest payable	$87,500
	Interest expense	$17,500
	Cash [3,500,000 x 6% x 6/12]		$105,000
	[To record interest payment]

Q 3:

Amortization Table
				Carrying value
Date	Cash paid (A)	Interest Expense (B)	Amortization (A-B)
November 1				$5,513,346
May 1	$180,000	$220,534	$40,534	$5,553,880

Cash paid = Face value x interest rate = $6,000,000 x 6% x 6/12 = $180,000

Interest expense = Preceding carrying value x 8% x 6/12 = $220,534

Carrying value = Preceding carrying value + Amortization