On the first day of the fiscal year, a company issues a $3,100,000, 10%, 5-year

Question

On the first day of the fiscal year, a company issues a $3,100,000, 10%, 5-year bond that pays semiannual interest of $155,000 ($3,100,000 × 10% × ½), receiving cash of $2,871,837.

Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Explanation / Answer

3100000 - 2871837 = 228163

228163 / 5 = 45632.6

45632.6 / 2 = 22816.3

interest expense Dr 177816.3

Cr discount on bonds payable 22816

Cr cash 155000

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