Question

Straight-Line Discount Amortization

Instructions

Chart of Accounts

General Journal

Instructions

Bryan Company issued $510,000 of 9% face value bonds on January 1, 2016, for $498,840. The bonds are due December 31, 2018, and pay interest semiannually on June 30 and December 31. Bryan uses the straight-line amortization method.

Required:

Prepare the journal entries to record the issuance of the bonds and the first two interest payments.

Chart of Accounts

CHART OF ACCOUNTS
Bryan Company
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 255 Bonds Payable 256 Premium on Bonds Payable 257 Discount on Bonds Payable 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

General Journal

Prepare the journal entries to record the issuance of the bonds on January 1 and the first two interest payments on June 30 and December 31. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9

Answer 1

Solution

2020	Account Title and Explanation	Debit	Credit
Jan 1 2016	Cash	$ 498,840
	Discount on bonds payable	$ 11,160
	Bonds payable		$ 510,000
	(To record Issuance of bonds )
June 30-2016	Bond interest expense	$ 24,810
	Discount on bonds payable		$ 1,860
	Cash		$ 22,950
	(Interest on bond paid and Discount amortized)
Dec 31 2016	Bond interest expense	$ 24,810
	Discount on bonds payable		$ 1,860
	Cash		$ 22,950
	(Interest on bond paid and Discount amortized)

.

Working

Bond issue price	$     498,840.00
Face value	$     510,000.00
Discount on bonds payable	$     (11,160.00)
Number of Interest payments (3 years x 2)	6
Discount/ premium to be amortized per Half year	$       (1,860.00)
Interest paid in cash(510000 x 4.5%)	$       22,950.00
Interest expense (22950+1860)	$       24,810.00