Question

lossom company issued $/10,000, 12%, 10-year bonds on December 31, 2019, tor S640,000. Interest is payable annually on December 31, Blossom company uses the straight-line method to amortize bond premiu scount. repare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit ec. 31, 2019 Interest Expense 92200 Interest Payable 85200 Discount on Bonds Payable SHOW LIST OF ACCOUNTS repare the journal entry to record the payment of interest and the discount amortization on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent anually.) Date Account Titles and Explanation Debit Credit ec. 31, 2020 SHOW LIST OF ACCOUNTS LINK TO TEXT

Answer 1

1)
	Date	Account titles and Explanation			Debit	Credit
	Dec 31, 2019	Cash			$ 6,40,000
		Discount on Bonds Payable			$     70,000
		Bonds Payable				$       7,10,000
		(To record issuance of bonds)
	Working:
	Face Value of Bonds					$       7,10,000
	Amount received on issuance of bonds					$       6,40,000
	Discount on Bonds Payable					$           70,000
2)	Date	Account titles and Explanation			Debit	Credit
	Dec 31, 2020	Interest Expense			$     92,200
		Discount on bonds payable				$             7,000
		Cash				$           85,200
		(To record interest expense and discount amortization)
	Working:
	# 1	Annual interest paid in cash	=	Face Value * Coupon rate
			=	$ 7,10,000	*	12%
			=	$     85,200
	# 2	Straight line bond amortization	=	Bond's discount/Bond's Life
			=	$     70,000	/	10
			=	$       7,000
	# 3	Interest Expense	=	Bonds Coupon paid in cash + Discount amortization
			=	$     85,200	+	$             7,000
			=	$     92,200
3)	Date	Account titles and Explanation			Debit	Credit
	Dec 31, 2029	Bonds Payable			$ 7,10,000
		Cash				$       7,10,000
		(To record redemption of bonds at Par)