Daniels Consulting is considering raising additional capital. Daniels plans to r

Question

Daniels Consulting is considering raising additional capital. Daniels plans to raise the capital by issuing $500,000 of 8%, seven-year bonds on December 1, 2017. The bonds pay interest semiannually on May 31 and January 31. On December 1, 2017, the market rate of interest required by investors for similar bonds is 10%. The bonds are sold at $450,480.

1. Calculate the premium, or discount related to the bond below the JE form.

2.Calculate and record below the cash received on the bond issue date.

3. Journalize the adjusting entry related to this bond on Dec. 31, including the amortization of the premium or discount using the straight-line interest method. Note that the amortized premium or discount is only for one month.

Explanation / Answer

1.

Discount = 49520

2.

3.

[Bond issued at discount]

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