QUESTION 7 Not yet answered Points out of 16.00 F Flag question Bonds Payable Jo

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QUESTION 7 Not yet answered Points out of 16.00 F Flag question Bonds Payable Journal Entries; Effective Interest Amortization on December 31, 2009, Blair Company issued $800,000 of 20-year, 1 1% bonds payable for $754,784, yielding an effective interest rate of 12%. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the Issuance of the bonds, (b) the semlannual interest payment and discount amortization (effective interest method) on June 30, 2010, and (C) the semlannual interest payment and discount amortization on December 31, 2010. Round amounts to the nearest dollar. General Journal Description DebitCredit Date Dec.31 Cash To record issuance of bonds

Explanation / Answer

Working:

General Journal Date Description Debit Credit a.) Dec. 31 Cash 754784 Discount on bonds payable 45216 Bonds payable 800000 To record issuance of bonds. b.) Jun. 30 Interest expense 45287 Discount on bonds payable 1287 Cash ($800000 x 11% x 1/2) 44000 To record semiannual interest payment and discount amortization. c.) Dec. 31 Interest expense 45364 Discount on bonds payable 1364 Cash ($800000 x 11% x 1/2) 44000 To record semiannual interest payment.

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