On January 1, 2013, Lurline Corporation issued ten-year, 8 percent bonds with a

Question

On January 1, 2013, Lurline Corporation issued ten-year, 8 percent bonds with a face value of $500,000. The semi-annual interest dates are June 30 and December 31. The bonds were issued for $437,740 to yield an effective annual rate of 10 percent. The accounting year ends on December 31. Prepare entries in journal form without explanations to record the bond issue on January 1, 2013, and the payments of interest and amortization of discount on June 30 and December 31, 2013. Use the effective interest method of amortization. Round answers to the nearest dollar.

Explanation / Answer

Answer:

1 jan 2013

Cash A/C Dr.                                 $437740

Discount on Bonds Payable A/C Dr. $62260

   To Bonds Payable A/C $500000

30 june 2013

Interest Expense A/C Dr. $ 21887

          To Cash A/C                                       $20000

            To Discount on Bonds Payable             $1887

31 Dec 2013

Interest Expense A/C Dr. $ 21981.35

         To cash A/C $ 20000

           To Discount on Bonds Payable A/C    $ 1981.35

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