On January 1, 20x5, Becky Bishop Fashion Company issued ten-year, 8 percent bond
ID: 2419594 • Letter: O
Question
On January 1, 20x5, Becky Bishop Fashion Company issued ten-year, 8 percent bonds with a face value of $500,000. The semiannual interest dates are June 30 and December 31. The bonds were issued for $437,740 to yield an effective annual rate of 10 percent. The accounting year ends on December 31. Prepare entries in journal form without explanations to record the bond issue on January 1, 20x5, and the payments of interest and amortization of discount on June 30 and December 31, 20x5. Use the effective interest method of amortization. Round answers to the nearest dollar.
Explanation / Answer
Date Interest pay Interest Exp Amortization Debit Balance in Bond Discount Credit Balance in Bond payable Book Value 01-Jan 62260 500000 437740 30-Jun 20000 21887 1887 60373 500000 439627 31-Dec 20000 21981 1981 58392 500000 441608 Date Account Name Debit Credit 01-Jan Cash 437740 Discount on Bonds Payable 62260 Bonds Payable 500000 30-Jun Interest Expense 21887 Discount on Bonds Payable 1887 Cash 20000 31-Dec Interest Expense 21981 Discount on Bonds Payable 1981 Cash 20000
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