Question

Paulson Company issues 10%, four-year bonds, on December 31, 2017, with a par value of $107,000 and semiannual interest payments.

Semiannual Period-End			Unamortized Discount			Carrying Value
(0)	12/31/2017		$	6,873		$	100,127
(1)	6/30/2018			6,014			100,986
(2)	12/31/2018			5,155			101,845

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

(a) The issuance of bonds on December 31, 2017.

(b) The first interest payment on June 30, 2018.

(c) The second interest payment on December 31, 2018.

  

Answer 1

Solution:

Journal Entries -Paulson Company
Date	Particulars	Debit	Credit
31-Dec-17	Cash Dr	$1,00,127
	Discount on Bond payable Dr	$6,873
	To bonds payable		$1,07,000
	(Being bond issued at discount)
30-Jun-18	Interest Expense Dr	$6,209
	To Discount on Bond payable ($6873/8)		$859
	To Cash ($107000*10%*6/12)		$5,350
31-Dec-18	Interest Expense Dr	$6,209
	To Discount on Bond payable		$859
	To Cash		$5,350