Dobbs Company issues 5%, two-year bonds, on December 31, 2016, with a par value

Question

Dobbs Company issues 5%, two-year bonds, on December 31, 2016, with a par value of $95,000 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, 2016.

(b) The first through fourth interest payments on each June 30 and December 31.

(c) The maturity of the bond on December 31, 2018.

Semiannual
Period-End Unamortized Discount Carrying Value (0) 12/31/2016 $ 5,900 $ 89,100 (1) 6/30/2017 4,425 90,575 (2) 12/31/2017 2,950 92,050 (3) 6/30/2018 1,475 93,525 (4) 12/31/2018 0 95,000

Explanation / Answer

Journal Entries: Date Accounts title and explanations Debit $ Credit $ Dec 31 2016 Cash Account Dr. 89100 Discount on Bonds payable Dr. 5900      Bonds payble 95000 June 30 2017 Interest expense Dr. 6225     Cash Account 4750     Discount on Bonds payable 1475 Dec 31 20 17 Interest expense Dr. 6225     Cash Account 4750     Discount on Bonds payable 1475 June 30 2018 Interest expense Dr. 6225     Cash Account 4750     Discount on Bonds payable 1475 Dec 31 2018 Interest expense Dr. 6225     Cash Account 4750     Discount on Bonds payable 1475 Dec 31 2018 Bonds payable Dr. 95000      Cash Account 95000

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