Bond Discount, Entries for Bonds Payable Transactions On July 1, 2012, Bliss Ind

Question

Bond Discount, Entries for Bonds Payable Transactions
On July 1, 2012, Bliss Industries Inc. issued $24,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $19,200,577. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Journalize the entries to record the following: (For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".)
a. The first semiannual interest payment on December 31, 2012, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)

Explanation / Answer

a. The first semiannual interest payment on December 31, 2012 24000000*.11/2 = 1,320,000 Interest expense (Dr.) 1320000 Cash (Cr.) 1320000 amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) (24000000-19200577)/20/2 = 119986 Interest expense (Dr.) 119986 Discount on bonds payable (Cr.) 119986

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