On January? 31, 2016 Driftwood ?Logistics, Inc., issued five-year, 9?% bonds pay

Question

On January? 31, 2016 Driftwood ?Logistics, Inc., issued five-year, 9?% bonds payable with a face value of $11,000,000.The bonds were issued at 93 and pay interest on January 31 and July 31. Driftwood Logistics, Inc., amortizes bond discount by the? straight-line method.

a. Record the issuance of the bond payable on January? 31, 2016.

b. Record the payment of semiannual interest and amortization of bond discount on July? 31,2016.

c. Record the interest accrual and discount amortization on December? 31, 2016. ?(Do not round intermediary calculations. Only round the final amount to the nearest whole? dollar.)

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Explanation / Answer

Journal entry :

No Date Accounts & explanation debit credit 1 January 31,2016 Cash (11000000*.93) 10230000 Discount on bonds payable 770000 Bonds payable 11000000 (To record bonds issue) 2 July 31, 2016 Interest expense 572000 Discount on bonds payable (770000/10) 77000 Cash (11000000*9%*6/12) 495000 (To record interest) 3 Dec 31, 2016 Interest expense 476667 Discount on bonds payable (770000/60*5) 64167 Interest payable (11000000*9%*5/12) 412500

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