Dobbs Company issues 9%, two-year bonds, on December 31, 2017, with a par value

Question

Dobbs Company issues 9%, two-year bonds, on December 31, 2017, with a par value of $109,000 and semiannual interest payments.

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

Required:
(a) The issuance of bonds on December 31, 2017.
(b) The first through fourth interest payments on each June 30 and December 31.
(c) Record the maturity of the bonds on December 31, 2019.

Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2017 $ 6,180 $ 102,820 (1) 6/30/2018 4,635 104,365 (2) 12/31/2018 3,090 105,910 (3) 6/30/2019 1,545 107,455 (4) 12/31/2019 0 109,000

Explanation / Answer

Semi annual interest = ( $ 109,000 x 9% x 6/12 ) = $ 4,905 Journal Entries Date Account's tittle Debit $ Credit $ 2017 31-Dec Cash                    102,820 Discount on issue of Bond                        6,180 9%, 2-year Bond                109,000 ( issue of bond at a discount ) 2018 30-Jun Interest expenses ( $ 4,905 + $ 1,545 )                        6,450 Discount on issue of Bond                    1,545 Cash                    4,905 ( semi annual interest and amortization of discount ) 31-Dec Interest expenses ( $ 4,905 + $ 1,545 )                        6,450 Discount on issue of Bond                    1,545 Cash                    4,905 ( semi annual interest and amortization of discount ) 2019 30-Jun Interest expenses ( $ 4,905 + $ 1,545 )                        6,450 Discount on issue of Bond                    1,545 Cash                    4,905 ( semi annual interest and amortization of discount ) 31-Dec Interest expenses ( $ 4,905 + $ 1,545 )                        6,450 Discount on issue of Bond                    1,545 Cash                    4,905 ( semi annual interest and amortization of discount ) 31-Dec 9%, 2-year Bond                    109,000 Cash                109,000 ( Maturity of Bond )

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