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.

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

Discount on bonds = 500000-450480= 49520 Interest expense 3923          Discount on bonds payable 590 =49520/7/12           Interest payable 3333 =500000*8%/12 Note: Answers have been rounded off to 0 decimal places

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