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A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 9.5%. The company received $484,087 in cash proceeds. Using the straight-line method, prepare the issuer's journal entry to record the first semiannual interest payment and the amortization of any bond discount or premium.(Round amounts to the nearest whole dollar)

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Answer:

The Journal entries are as follows:

(1)

Cash A/c                                        Dr. $484,087

Discount on Bonds Payable A/c  Dr. $15913

To  Bonds Payable (a liability account)                    $500,000

(To record the first semiannual interest payment )

Workings:

Discount on bonds = 500,000 - 484,087

                                = 15,913

2.

Bonds payable A/c  Dr. $200,000

To Cash                                      200,000

(To record the amortization of any bond discount)

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