Paulson Company issues 6%, four-year bonds, on December 31, 2017, with a par val

Question

Paulson Company issues 6%, four-year bonds, on December 31, 2017, with a par value of $95,000 and semiannual interest payments.

     
Use the above straight-line bond amortization table and prepare journal entries for the following.

(a) The issuance of bonds on December 31, 2017.

(b) The first interest payment on June 30, 2018.

(c) The second interest payment on December 31, 2018

Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2017 $ 6,633 $ 88,367 (1) 6/30/2018 5,804 89,196 (2) 12/31/2018 4,975 90,025

Explanation / Answer

Working notes

(b) Discount on bonds payable = ($6,633-$5,804) = $829

Cash = $95,000*6%*0.5 = $2,850

(c) Discount on bonds payable = ($5,804-$4,975) = $829

Cash = $95,000*6%*0.5 = $2,850

Date Journal Debit Credit Dec. 31,2017 Cash $88,367 Discount on bonds payable $6,633 Bonds payable $95,000 June 30,2018 Bond Interest Expense $3,679 Discount on bond payable $829 Cash $2,850 Dec. 31, 2018 Bond Interest Expense $3,679 Discount on Bonds Payable $829 Cash $2,850

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