Brief Exercise 10-16 Blossom Company issues $4.30 million, 10-year, 76 bonds at

Question

Brief Exercise 10-16 Blossom Company issues $4.30 million, 10-year, 76 bonds at 96, with interest payable on December 31. The straight-Jine method is used to amortize bond discount pare the joumal entry to record the sale ofthese bonds on January 1, 2017, (Credit account titles are automatically And ented when amount lx entered. Do Date Account Titles and Explanation Debit Jan. 1 Prepare the journal entry to record interest expense and bond discount amortization on December 31, 2017, assuming no previous accrual of interest. (Credit account tities are automatically indented when amount is entered. Do not indent manually,) Date Account Titles and Explanation Dec. 31 Debit Credit All Rights Reserved. A Division of 2.50 280

Explanation / Answer

Face Value of Bonds      4,300,000.00 Money received on issue = 4.3m*96%      4,128,000.00 Discount on issue of Bonds = 4.3m-4.128m         172,000.00 Time period in years                    10.00 Discount written off every years = 172000/10            17,200.00 Entry at time of isuance would be Cash A/C Dr      4,128,000.00 Discount on Bonds payable Dr         172,000.00 To Bonds Payable      4,300,000.00 Interest Expense Dr         318,200.00 To Discount on Bonds Payable            17,200.00 To Cash = 4.3m*7%         301,000.00

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