Joseph Company issued $793,000, 13%, 10-year bonds on December 31, 2009, for $73
ID: 2345263 • Letter: J
Question
Joseph Company issued $793,000, 13%, 10-year bonds on December 31, 2009, for $730,000. Interest is payable semiannually on June 30 and December 31. Joseph Company uses the straight-line method to amortize bond premium or discount.I only need help on finding the discounts on bonds payable for payment of interest and the discount amortization on june 30, 2010
The payment of interest and the discount amortization on June 30, 2010. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
Date Account/Description Debit Credit
2010
June 30 Bond interest expense ?
Cash 51545
Discounts on bonds payable ?
Explanation / Answer
The payment of interest and the discount amortization on June 30, 2010 Journal Entry: Debit Interest Expense $47,500 Credit Cash $44,000 ($800,000 X 11% / 2) Credit Bond Discount $3,500 ($70,000 / 10 / 2) The payment of interest and the discount amortization on December 31, 2010 Journal Entry: No change from above: Debit Interest Expense $47,500 Credit Cash $44,000 ($800,000 X 11% / 2) Credit Bond Discount $3,500 ($70,000 / 10 / 2) If they used the effective rate to amortize the bond discount, then the interest expense and the amortization amount would differ between the two entries. In this case, since they use the straight line methd, the entries are identical.
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