Question

Paulson Company issues 6%, four-year bonds, on January 1 of this year, with a par value of $90,000 and semiannual interest payments. 

	Semiannual Period-End	Unamortized Discount	Carrying Value
(0)	January 1, issuance	$6,533	$83,467
(1)	June 30, first payment	5,716	84, 284
(2)	December 31, second payment	4,899	85, 101

Use the above straight-line bond amortization table and prepare journal entries for the following.

 (a) The issuance of bonds on January 1. 

 (b) The first interest payment on June 30.

 (c) The second interest payment on December 31. 

Answer 1

• Calculations are shown wherever required.

• Required journal entries would be

Date	Accounts title	Debit	Credit
01-Jan	Cash	$83,467
	Discount on Bonds payable	$6,533
	Bonds Payable		$90,000
	(to record issuance)
30-Jun	Interest Expense	$3,517
	Discount on Bonds Payable ($6533 - 5716)		$817
	Cash ($90000 x 6% x 6/12)		$2,700
	(to record interest #1)
31-Dec	Interest Expense	$3,517
	Discount on Bonds Payable ($5716 - 4899)		$817
	Cash ($90000 x 6% x 6/12)		$2,700
	(to record interest #2)