Question

Exerclse 10-5 Stralght-Line: Recording bond Issuance and discount amortlzatlon LO P1, P2 Dobbs Company issues 696, two-year bonds, on December 31, 2017, with a par value of $106,000 and semiannual interest payments. Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2017 (1) 6/30/2018 (2) 12/31/2018 (3) 6/30/2019 (4) 12/31/2019 $6,120 4,590 3,060 1,530 $ 99,880 101,410 102,940 104,470 106,000 Use the above straight-line bond amortization table and prepare journal entries for the following Required (a) The issuance of bonds on December 31, 2017 (b) The first through fourth interest payments on each June 30 and December 31. (c) Record the maturity of the bonds on December 31, 2019 Complete this question by entering your answers in the tabs below Required A Required B Required C The issuance of bonds on December 31, 2017 View transaction list Journal entry worksheet Record the issue of bonds with a par value of $106,000 cash on December 31, 2017 Nate: Enter debits before credits. Date General Journal Debit Credit Dec 31. 2017 Record entry Clear entry View generaljournal

Answer 1

Answer

• All working forms part of the answer
• Workings

A	Par Value of Bond	$        106,000.00
B	Carrying Value	$          99,880.00
C = A- B	Discount on Bonds	$             6,120.00
D	No. of interest payments	4
E = C/D	Amount to be amortised with each payment	$             1,530.00

	Discount amortised	Unamortised Discount	Carrying Value
	[A = calculated above]	[B = B - A]	[C = C + A]
12-Dec-17		$           6,120.00	$          99,880.00
30-Jun-18	$             1,530.00	$           4,590.00	$        101,410.00
31-Dec-18	$             1,530.00	$           3,060.00	$        102,940.00
30-Jun-19	$             1,530.00	$           1,530.00	$        104,470.00
31-Dec-19	$             1,530.00	$                        -	$        106,000.00

Interest paid in Cash = 106000 x 6% x 6/12 = $ 3,180

• All the requirements, based on above:

Requirement A
Date	General Journal	Debit	Credit
12-Dec-17	Cash	$          99,880.00
	Discount on Bonds payable	$             6,120.00
	Bonds payable		$      106,000.00
	(Bonds issued at discount)
Requirement B
Date	General Journal	Debit	Credit
30-Jun-18	Interest Expense	$             4,710.00
	Discount on Bonds Payable		$           1,530.00
	Cash		$           3,180.00
	(1st interest payment)
31-Dec-18	Interest Expense	$             4,710.00
	Discount on Bonds Payable		$           1,530.00
	Cash		$           3,180.00
	(2nd interest payment)
30-Jun-19	Interest Expense	$             4,710.00
	Discount on Bonds Payable		$           1,530.00
	Cash		$           3,180.00
	(3rd interest payment)
31-Dec-19	Interest Expense	$             4,710.00
	Discount on Bonds Payable		$           1,530.00
	Cash		$           3,180.00
	(4th interest payment)
Requirement C
Date	General Journal	Debit	Credit
31-Dec-19	Bonds Payable	$        106,000.00
	Cash		$      106,000.00
	(Cash paid at maturity)