Simko Company issued $650,000, 6-year, 5 percent bonds on January 1, 2015. The b

Question

Simko Company issued $650,000, 6-year, 5 percent bonds on January 1, 2015. The bonds were issued for $605,000. Interest is payable annually on December 31. Using straight-ine amortization, prepare journal entries to record (a) the bond issuance on January 1, 2015, and (b) the payment of interest on December 31, 2015 (lf no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the interest payment on December 31, 2015 Note: Enter debits before credits. " Date General Journal Debit Credit December 31, 2015 interest Expense Discount on Bonds Payable Cash

Explanation / Answer

We can see that bonds are issued at discount and the discount amount is =650000-605000=45000
Dec 31st 2015:
Interest expense(db) 40000
Discount on bonds payable(cr) 45000/6=7500
cash(cr) 650000*5%=32500

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