Question 3 On January 31, 2016 Muscle Sports Cars issued 10-year, 4% bonds with a face...
Question 3
On January 31, 2016 Muscle Sports Cars issued 10-year, 4% bonds with a face value of $100,000. The bonds were issued at 94 and pay interest on January 31 and June 30. Muscle amortizes their bonds by the straight-line method.
- Record (a) issuance of the bonds on January 31, (b) the semi-annual interest payment and discount
amortization on June 30, and (c) the interest accrual and discount amortization on December 31.
Homework Answers
a.
| Date | Debit | Credit | |
| 31-Jan | Cash | 94,000.00 | |
| Discount on Bonds Payable | 6,000.00 | ||
| Bonds Payable | 100,000.00 |
b.
| Date | Debit | Credit | |
| 30-Jun | Interest Expense | 1,917.00 | |
| Discount on Bonds Payable (6,000 x 5/6 x 1/20) | 250.00 | ||
| Cash | 1,667.00 |
c.
| Date | Debit | Credit | |
| 31-Dec | Interest Expense | 1,917.00 | |
| Discount on Bonds Payable (6,000 x 5/6 x 1/20) | 250.00 | ||
| Interest Payable | 1,667.00 |
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