Question

Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto Company issued $6,500,000 of six-year, 7% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 8%, resulting in Jacinto Company receiving cash of $6,194,985. a. Journalize the entries to record the following: 1. Issuance of the bonds 2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. 3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.

Answer 1

Journal entry

No	General Journal	Debit	Credit
a1	Cash	6194985
	Discount on bonds payable	305015
	Bonds payable		6500000
a2	Interest expense	252918
	Discount on bonds payable (305015/12)		25418
	Cash (6500000*7%*6/12)		227500
a3	Interest expense	252918
	Discount on bonds payable		25418
	Cash		227500