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On January 1, 2019, Drennen Inc. issued $4.6 million face amount of 6-year, 14% stated rate...

On January 1, 2019, Drennen Inc. issued $4.6 million face amount of 6-year, 14% stated rate bonds when market interest rates were 12%. The bonds pay semiannual interest each June 30 and December 31 and mature on December 31, 2024.

b-2. Assume instead that the proceeds were $4,820,000. Record the journal entry to show the payment of semiannual interest and the related discount amortization on June 30, 2019, assuming that the discount of $180,000 is amortized on a straight-line basis.

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Answer #1
Working Notes:
Calculation of total interest expenses
Par Value of the bonds = $                 46,00,000
Issue price of the bond = $                 48,20,000
Coupon rate = 14%
Coupon amount = (Par value X Coupon rate) $                    6,44,000
Half Yearly Coupon Rate = $ 644,000 / 2 = $                    3,22,000
Add: Discount amortization $                    1,80,000
Interest Expenses $                    5,02,000
SOLUTION:
Journal entry of the same is post as below,
Journal Entries
Date Account Title and explanation Debit Credit
June 30. 2019 Interest Expenses $                    5,02,000
        Cash $              3,22,000
        Discount on Bonds Payable $              1,80,000
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