Mellilo Corporation issued $5,200,000 of 20-year, 9.5 percent bonds on July 1, 2
ID: 2465172 • Letter: M
Question
Mellilo Corporation issued $5,200,000 of 20-year, 9.5 percent bonds on July 1, 2015, at 98. Interest is due on June 30 and December 31 of each year, and all of the bonds in the issue mature on June 30, 2035. Mellilo's fiscal year ends on December 31.
Record the issuance of the bonds and entries to be passed post the issue. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
-Okay, so i need to record the issuance of bonds.
-record the payment of interest and amortize bond discount
-record the final interest payment and amortize bond discount
-Record the retirement of bonds at maturity
I just cant seem to get my numbers straight. Any help is appreciated
Mellilo Corporation issued $5,200,000 of 20-year, 9.5 percent bonds on July 1, 2015, at 98. Interest is due on June 30 and December 31 of each year, and all of the bonds in the issue mature on June 30, 2035. Mellilo's fiscal year ends on December 31.
Explanation / Answer
Bonds are issue at discount @2 and payable at par
At initation
Cash dr. 5,096,000
Discount dr. 104,000
Bond payable $5,200,000
Amortization rate on bond payable
(104,000 / 20) = $5,200
Half year
Interest expense dr. 249,600
Discount 2600
Cash 247,000
At retirement June 30, 2035
Interest expense dr. $249,600
Bond payable dr. $5,200,000
Discount $2600
Cash $5,447,000