Dupre Corp. which operates on a calendar year basis, issued a bond with a face v

Question

Dupre Corp. which operates on a calendar year basis, issued a bond with a face value of $4,000,000 on April 1,2015. The bond has a stated rated of 8% and it will mature on March 31, 2018. REQUIRED Present the journal entries to record the following: April 1/15 Issued bonds at 96 Sept. 30/15 Paid the semi-annual interest (straight-line method) Dec. 31/15 Accrual of interest and amortization of bond premium or discount to this date using the straight-line method. Dec. 31/15 Make the necessary closing entry.

Explanation / Answer

journal 1-Apr cash 3840000 discount on issue 160000 To bonds payable 4000000 30-Sep interest payable 160000    To cash 160000 31-Dec interest expense 186667 To interest payable 160000    To discount on issue 26667 (160000/6)

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