Sylvestor Company issues 11%, five-year bonds, on December 31, 2016, with a par

Question

Sylvestor Company issues 11%, five-year bonds, on December 31, 2016, with a par value of $210,000 and semiannual interest payments.

Use the above bond amortization table and prepare journal entries to record (a) the issuance of bonds on December 31, 2016; (b) the first interest payment on June 30, 2017; and (c) the second interest payment on December 31, 2017.

Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2016 $ 8,500 $ 201,500 (1) 6/30/2017 7,650 202,350 (2) 12/31/2017 6,800 203,200

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Dec 31,2016 Cash 201500 Discount on bonds payable 8500       Bonds payable     210000 (To record issue bonds payable) June 30,2017 Interest expense 12400     Discount on bonds payable 850      Cash 11550 Dec 31,2017 Interest expense 12400      Discount on bonds payable 850       Cash 11550

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