Dobbs Company issues 6%, two-year bonds, on December 31, 2017, with a par value

Question

Dobbs Company issues 6%, two-year bonds, on December 31, 2017, with a par value of $94,000 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 $ 5,880 $ 88,120 (1) 6/30/2018 4,410 89,590 (2) 12/31/2018 2,940 91,060 (3) 6/30/2019 1,470 92,530 (4) 12/31/2019 0 94,000

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Cash 88120 Discount on bonds payable 5880      Bonds payable 94000 (To record bond issue) Interest expense 4290      Discount on bonds payable 1470       Cash (94000*.03) 2820 (TO record first interest payment) Interest expense 4290       Discount on bonds payable 1470       Cash 2820 (To record second interest payment) Interest expense 4290      Discount on bonds payable 1470       Cash 2820 (To record third interest payment) Interest expense 4290      Discount on bonds payable 1470       Cash 2820 (To record fourth interest payment) Bonds payable 94000      Cash 94000 (To record maturity of bonds)

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