Question

Paulson Company issues 8%, four-year bonds, on December 31, 2018, with a par value of $108,000 and semiannual interest payments.

Semiannual Period-End			Unamortized Discount			Carrying Value
(0)	12/31/2018		$	6,893		$	101,107
(1)	6/30/2019			6,031			101,969
(2)	12/31/2019			5,169			102,831

     
Use the above straight-line bond amortization table and prepare journal entries for the following.

1. (a) The issuance of bonds on December 31, 2018.
2. (b) The first interest payment on June 30, 2019.
3. (c) The second interest payment on December 31, 2019.
   Paulson Company issues 8%, four-year bonds, on December 31, 2018, with a par value of $108,000 and semiannual interest payments. Semiannual Period-End (0) 12/31/2018 (1) 6/30/2019 2) 12/31/2019 Unamortized Discount $6,893 6,031 5,169 Carrying Value $101,107 101,969 102,831 Use the above straight-ine bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on December 31, 2018. (b) The first interest payment on June 30, 2019. (c) The second interest payment on December 31, 2019.
   

Answer 1

Journal Entries Debit Post. Ref. Date Account Title and Explaination Credit Cash Discount on Issue of Bonds Dec.31 S101,107.00 $6,893.00 Bonds Payable $108,000.00 To record Issue of Bonds) Jun.30Interest Expense $5,181.63 Cash ($108000*8%*6/12) Discount on Issue of Bonds S4,320.00 $861.63 2019 To record first Interest payment on June 30, 2019) Dec.31 Interest Expense $5,181.6:3 Discount on Issue of Bonds Cash ($108000*8%*6/12) $861.63 S4,320.00 2019 To record first Interest payment on December 31, 2019)

Working Note Discount - Face Value - Issue Price $6893 Duration 4 years Annual Amortization $6893/4 For Semi Annual Period $1723/2 $1.723 $862