[The following Intormation apples to the questions displayed below. Legacy issue

Question

[The following Intormation apples to the questions displayed below. Legacy issues $710,000 of 8.0%, four-year bonds dated January 1-2013, that pay interest semiannually on June 30 and December 31. They are issued at $621.812 and their market rate is 12% ot the issue date References Section Break Problem 14-6A Straight-Line: Amortization of bond Lo P2, P3 0.83 points Problem 14-6A Part 1 1. Prepare the January 1, 2013, journal entry to record the bonds' issuance View transaction list Journal entry worksheet Record the issue of bonds with a par value of $710,000 cash on January 1, 2013 at an issue price of $621,812. Note: Enter debits before credits. Date General Journal Debit Credit Jan. 1,2013 Record entry Clear entry View general journal

Explanation / Answer

1) Date General Journal Debit Credit Jan. 1, 2013 Cash $ 6,21,812 Discount on Bonds Payable $     88,188 Bonds Payable $ 7,10,000 (To record bond issuance) 3) Semi annual period-End Unamortized discount Carrying Vlue 01/01/2013 $     88,188 $ 6,21,812 06/30/2013 $     77,165 (88188-11024) $ 6,32,836 (621812+11024) 12/31/2013 $     66,141 $ 6,43,859 06/30/2014 $     55,118 $ 6,54,883 12/31/2014 $     44,094 $ 6,65,906 Semi annual Period 4*2 = 8 Unamortized discount $     88,188 Periodical Amortiztion $                                                              88,188 / 8   = $                          11,024 4) Date General Journal Debit Credit June 30, 2013 Interest Expenses $     39,424 Discount on bonds Payable $     11,024 Cash $     28,400 (To record Interest Expensess) December 31, 2013 Interest Expenses $     39,424 Discount on bonds Payable $     11,024 Cash $     28,400 (To record Interest Expensess) Amortization table Semi Annual Period Interest paid in cash Interest expenses Discount amortized Unamortized Discount Carrying Value 0 0 0 0 $ 88,188 $ 6,21,812 1 $                                                              28,400 $     39,424 $                          11,024 $ 77,165 $ 6,32,836 2 $                                                              28,400 $     39,424 $                          11,024 $ 66,141 $ 6,43,859 3 $                                                              28,400 $     39,424 $                          11,024 $ 55,118 $ 6,54,883 4 $                                                              28,400 $     39,424 $                          11,024 $ 44,094 $ 6,65,906 5 $                                                              28,400 $     39,424 $                          11,024 $ 33,071 $ 6,76,930 6 $                                                              28,400 $     39,424 $                          11,024 $ 22,047 $ 6,87,953 7 $                                                              28,400 $     39,424 $                          11,024 $ 11,024 $ 6,98,977 8 $                                                              28,400 $     39,424 $                          11,024 0 $ 7,10,000 Interest in cash = $ 7,10,000 x 8% x 6/12 = $     28,400

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