On January 1, 2016, Educators Credit Union (ECU) ssued 8% 20-year bonds payable

Question

On January 1, 2016, Educators Credit Union (ECU) ssued 8% 20-year bonds payable with face value of $500,000 The bords pay interest on une 30 and December 31 Rend te requirements Requirement 3. The ise price of the bonds ie 97 Joumalize the bond transactionsAu bonds payable are amortized using the stght mn method Reen db frt, then onedts Select expionations on the last Bne of he Debit bonds be priced The issue price of the bonds 8 97 Joualire the foibeing bond rareacto Issuance of te bondson Jauary 1, 20 Debit aun 30

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Jan 1,2016 Cash 485000 Discount on bonds payable 15000     Bonds payable 500000 (To record issue bonds) June 30,2016 Interes expense 20375     Discount on bonds payable (15000/40) 375      Cash (500000*8%*6/12) 20000 (To record payment of interest) Dec 31,2016 Interest expense 20375      Discount on bonds payable 375       Cash 20000 (To record interest paid) Jan 1,2036 Bonds payable 500000      Cash 500000 (To record maturity of bonds)

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