M Chapter 9 Homework M Check Your Work O Rae Srem murd-Black Bee × × C ezto.mhed

Question

M Chapter 9 Homework M Check Your Work O Rae Srem murd-Black Bee × × C ezto.mheducation.com/hm.tpx value: 2.00 points Pretzelmania, Inc., issues 5%, 20-year bonds with a face amount of $59,000 for $52,181 on January 1, 2018. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid semiannually on June 30 and December 31 1. & 2. Record the bond issue and first interest payment on June 30, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 Record the bond issue. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018 Record entry Clear entry View general journal

Explanation / Answer

1. Entry to record bond issue

As the company received $52,181 against bonds of face value $59,000 , the difference is accounted as discount on bonds issue.

2. Entry to record payment of interest on June30, 2018

Cash payment for semi annual interest (5% of $59,000)/2 $1,475

Amortization of discount on bond issue ($6,819 / 40) * $ 170

Interest expense $1,645

* Discount on bond issue is to be amortized over the pertm of the bonds i.e., 20 years. Since the interest payment is semiannually , the discoutn is to be amortized over 40 semi annual periods.

Date Account title Debit Credit January1, 2018 Cash 52,181 Discount on bond issue 6,819 Bonds payable 59,000

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