Question

The following information applies to the questions displayed below.) Legacy issues $740,000 of 7.5%, four-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. They are issued at $680,186 and their market rate is 10% at the issue date. 4. Prepare the journal entries to record the first two interest payments. View transaction list Journal entry worksheet Record the interest payment and amortization on June 30, 2017 Note: Enter debits before credits Date General Journal Debit Credit Jun 30, 2017

Answer 1

	Legacy
	Issue Price of Bonds	$       7,40,000.00
	Number of Years(4*2)	8
	Rate(7.5%)/2	3.75%
	Market Interest=(10%/2)	5%
	Company receiving Cash	$       6,80,186.00
	Journal Entries
Date	General,Journal	Debit	Credit
	Cash	$             6,80,186
	Discount on Bonds Payable($740000-$680186)	$                 59,814
	To Bonds Payable		$             7,40,000
	(Being amount of cash received on issue of Bonds)
30 june,2017	Bonds Interest Expense	$                 35,227
	To Discount on Bonds Payable($59814/8)		$                   7,477
	To Cash($740000*3.75%)		$                 27,750
	(Being amount of Interest Expense for the first half year)
31st,December 2017	Bonds Interest Expense	$                 35,227
	To Discount on Bonds Payable($59814/8)		$                   7,477
	To Cash($740000*3.75%)		$                 27,750
	(Being amount of Interest Expense for the first half year)
Schedule of Discount Amortization
Straight Line Method
(A)	(B)	(C )	(D)	(E )
Period	Cash paid	Interest Expense	Discount Amortized	Caryying Value of Bonds
		($740000*3.75%)	($59814/2)
Jun-17				$                                6,80,186
Jun-17	$                                                                                                          35,227	$                 27,750	$                   7,477	$                                6,87,663
Dec-17	$                                                                                                          35,227	$                 27,750	$                   7,477	$                                6,95,140
Jun-18	$                                                                                                          35,227	$                 27,750	$                   7,477	$                                7,02,616
Dec-18	$                                                                                                          35,227	$                 27,750	$                   7,477	$                                7,10,093
Jun-19	$                                                                                                          35,227	$                 27,750	$                   7,477	$                                7,17,570
Dec-19	$                                                                                                          35,227	$                 27,750	$                   7,477	$                                7,25,047
Jun-20	$                                                                                                          35,227	$                 27,750	$                   7,477	$                                7,32,523
Dec-20	$                                                                                                          35,227	$                 27,750	$                   7,477	$                                7,40,000
Total	$                                                                                                      2,81,814	$             2,22,000	$                 59,814