On January 31, 2016, Overton Logistics, Inc., issued ten-year, 3% bonds payable

Question

On January 31, 2016, Overton Logistics, Inc., issued ten-year, 3% bonds payable with a face value of $11,000,000. The bonds were issued at 97 and pay interest on January 31 and July 31. Overton Logistics, Inc., amortizes bond discount by the straight-line method. Requirement 1. Record (a) issuance of the bonds on January 31, 2016, (b) the semiannual interest payment and amortization of bond discount on July 31, 2016, and (c) the interest accrual and discount amortization on December 31, 2016. a. Record the issuance of the bond payable on January 31, 2016. (Record debits first, then credits. Exclude explanations from any journal entries.) Journal Entry Date Accounts Debit Jan 31

Explanation / Answer

a) Date Accounts Debit Credit 31-Jan Cash (11,000,000*97%) 10670000 2016 discount on bonds payable 330000 Bonds payable 11,000,000 31-Jul Interest expense 181500 Discount on bonds payable 16500 Cash (11,000,000*3%) 165000 31-Dec Interest expense 151250 Discount on bonds payable 13750 Cash (165,000/6*5) 137500

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