Homework SourseOn January 1 2009 a company issued and sold a 470000 8 10yea
On January 1, 2009, a company issued and sold a $470,000, 8%, 10-year bond payable, and received proceeds of 397,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
| Bond Interest Expense | 18,800 | |
| Discount on Bonds Payable | 3,650 | |
| Cash | 22,450 |
Solution
On January 1, 2009, a company issued and sold a $470,000, 8%, 10-year bond payable, and received proceeds of 397,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
Debit Bond Interest Expense 15,150
Debit Discount on Bonds Payable 3,650
Credit Cash 18,800
(Amortisation = 470000 - 397000 = 73000 / (10*2) = $3650
Interest Half Year = 470000 * 4% = $18800 )
