QS 10-7 Recording bond issuance and discount amortization LO P1, P2 Sylvestor Co

Question

QS 10-7 Recording bond issuance and discount amortization LO P1, P2 Sylvestor Company issues 12%, five-year bonds, on December 31, 2016, with a par value of $170,000 and semiannual interest payments.

Semiannual Period-End Unamortized Discount Carrying Value

(0) 12/31/2016 $ 8,300 $ 161,700

(1) 6/30/2017 7,470 162,530

(2) 12/31/2017 6,640 163,360

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.

Explanation / Answer

Date Account Titles and Explanation Debit Credit 12/31/2016 Cash 161700 Discount on bonds payable 8300 Bonds payable 170000 (To record issuance of bonds) 6/30/2017 Interest expense 11030 Discount on bonds payable 830 Cash ($170000 x 12% x 6/12) 10200 (To record interest payment) 12/31/2017 Interest expense 11030 Discount on bonds payable 830 Cash ($170000 x 12% x 6/12) 10200 (To record interest payment)

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