Question

Discount Amortization On the first day of the fiscal year, a company issues a $2,600,000, 12 %, 9-year bond that pays semiannual interest of $156,000 ($2,600,000 x 12% x % ) , receiving cash of $2,221,467. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank

Answer 1

Journal entry for first interest payment is

Particulars	Debit($)	Credit($)
Interest Expense A/c	156,000
Cash A/c		156,000

(being semiannual interest paid on 12% 9-year bond)

Computation of discount to be amortised in 9 Years

= 2,600,000 - 2,221,467 / 9

=378,533 / 9

=42,059

Journal entry for amortisation of bond discount

Particulars	Debit($)	Credit($)
Loss on issue of bonds A/c	42,059
Discount on bonds payable A/c		42,059

(being bond discount amortised for one out of nine years)