M10-6 Recording the Issuance and Interest Payments of a Bond Issued at a Discoun

Question

M10-6 Recording the Issuance and Interest Payments of a Bond Issued at a Discount (with Discount Account) LO10-4 Coffman Company sold bonds with a face value of $994,000 for $602,749. The bonds have a coupon rate of 4 percent, mature in 9 years, and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Using a discount account, record the sale of the bonds on January 1 and the payment of interest on June 30 of this year. Coffman uses the effective-interest amortization method. Assume an annual market rate of interest of 11 percent. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round final answers to whole dollar amounts. View transaction list Journal entry worksheet Record the sale of the bonds on January 1. Note: Enter debits before credits. Date General Journal Debit Credit January 01 Record entry Clear entry View general journal

Explanation / Answer

1-Jan Cash 602749 Discount on bonds payable 391251        Bonds payable 994000 30-Jun Interest expense 33151 =602749*11%/2         Discount on bonds payable 13271         Cash 19880 =994000*4%/2

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