Question

Paulson Company issues 8%, four-year bonds, on January 1 of this year, with a par value of $92,000 and semiannual interest payments.

Semiannual Period-End		Unamortized Discount			Carrying Value
(0)	January 1, issuance	$	6,573		$	85,427
(1)	June 30, first payment		5,751			86,249
(2)	December 31, second payment		4,929			87,071

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

(a) The issuance of bonds on January 1.
(b) The first interest payment on June 30.
(c) The second interest payment on December 31.

1 Record the issue of bonds with a par value of $92,000 cash January 1.

2 Record the first interest payment on June 30.

3 Record the second interest payment on December 31.

Answer 1

Date	Account title	Debit	Credit
Jan. 1	Cash	85,427
	Discount on bonds payable	6,573
	Bonds payable		92,000
	(To record the issue of bonds)
Jun. 30	Interest expense	4,502
	Discount on bonds payable (6,573-5,751)		822
	Cash (92,000 x 8% x 1/2)		3,680
	(To record the first interest payment)
Dec. 31	Interest expense	4,502
	Discount on bonds payable (5,751-4,929)		822
	Cash (92,000 x 8% x 1/2)		3,680
	(To record the second interest payment)