Question

A company issues 7%, 10-year bonds with a face amount of $80,000 for $74,564 on January 1, 2021. The market interest rate for bonds of similar risk and maturity is 8%. Interest is paid semiannually on June 30 and December 31.

Required:
1. & 2. Record the bond issue and first interest payment on June 30, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Journal entry worksheet

• Record the bond issue.

Note: Enter debits before credits.

	Date General Journal Debit Credit January 01, 2021

Journal entry worksheet

• Record the first interest payment on June 30, 2021.

Note: Enter debits before credits.

	Date General Journal Debit Credit June 30, 2021

Answer 1

		Debit	Credit
January 01,2021	Cash	74564
	Discount on Bonds payable	5436
	Bonds payable		80000
		Debit	Credit
June 30,2021	Interest expense	2983		=74564*8%/2
	Discount on Bonds payable		183
	Cash		2800	=80000*7%/2
Alternatively, if straight line method is used:
		Debit	Credit
June 30,2021	Interest expense	3072
	Discount on Bonds payable		272	=5436/20
	Cash		2800	=80000*7%/2