Ask Question
2 March, 23:37

On January 1, the first day of the fiscal year, a company issues a $1,450,000, 5%, five-year bond that pays semiannual interest of $36,250 ($1,450,000 * 5% * ½), receiving cash of $1,408,720.

+3
Answers (1)
  1. 2 March, 23:42
    0
    Complete Question:

    On January 1, the first day of the fiscal year, a company issues a $1,450,000, 5%, five-year bond that pays semiannual interest of $36,250 ($1,450,000 * 5% * ½), receiving cash of $1,408,720

    Journalize the first interest payment and the amortization of the related bond discount using the Straight line method

    Answer:

    Kindly check Explanation

    Explanation:

    Given the following:

    Face value of bond issued = $1,450,000

    Cash received on Issuance = $1,408,720

    Number of Interest payment on bond = 5 * 2 = 10 (semiannual)

    Therefore, discount on bond:

    $ (1,450,000 - 1,408,720) = $41,280

    Spreading or amortizing diacou t on bond over the bond duration (use te straight line method)

    Discount / period

    $41,280 / 10 = $4,128

    Interest expense a/c Dr $40,378

    To discount on bond payable a/c Cr $4128

    To cash a/c $36,250
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “On January 1, the first day of the fiscal year, a company issues a $1,450,000, 5%, five-year bond that pays semiannual interest of $36,250 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers