Entries for Bonds Payable Transactions On July 1, 2012, Bliss Industries Inc. is

Question

Entries for Bonds Payable Transactions On July 1, 2012, Bliss Industries Inc. issued $24, 000, 000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $19, 200, 577. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Journalize the entry to record the amount of cash proceeds from the sale of the bonds. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Journalize the entries to record the following: (For a compound transaction, if an amount box does not require an entry, leave it blank or enter "O". ) The first semiannual interest payment on December 31, 2012, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar. ) The interest payment on June 30, 2013, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar. )

Explanation / Answer

We have Coupon = 11% Semi. Periods = 20Yr*2 per Yr = 40 1 Jul 2012 Cash Dr 19,200,577 Disc on Bond Dr 4,799,423 Bonds Payable Cr 24,000,000 Int on Bond = PMT = FV*COupon/Period per yr = 24,000,000*11%/2 = 1320,000 Disc Amotized = Total Disc/total Period = 4,799,423/40 = 119,986 31 Dec 2012 Int Exp Dr 1,439,986 Disc Amortization Cr 119,986 Cash Cr 1,320,000 30 Jun 2013 Int Exp Dr 1,439,986 Disc Amortization Cr 119,986 Cash Cr 1,320,000

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