Question

journal entries for bonds?

On January 1, 2008, a corporation issued $150,000, 8%, 10-year bonds, dated January 1, 2008, at 98. The bonds pay interest semiannually on January 1 and July 1. The company uses the straight-line method of amortization and has a calendar year end.



Prepare the journal entries that the corporation would make related to the bond issue on the dates below:

a. January 1, 2008
b. July 1, 2008

5 years ago - 1 answers

Best Answer

Chosen by Asker

a. January 1, 2008
Dr Cash $147,000 ($150,000 x 0.98)
Dr Discount on bonds payable $3,000 (amortized over 20 periods)
Cr Bonds payable $150,000 (always face value)

b. July 1, 2008
Dr Interest expense $6,150
Cr Discount on bonds payable $150 ($3,000/20)
Cr Cash $6,000 ($150,000 x 8% x 1/2)

5 years ago