Discount AmortizationOn the first day of the fiscal year, a company issues a $6,700,000, 12%, 4-year bond that pays semiannual interest of $402,000 ($6,700,000 × 12% × ½), receiving cash of $6,111,341.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.

Question
Asked Nov 10, 2019
195 views

Discount Amortization
On the first day of the fiscal year, a company issues a $6,700,000, 12%, 4-year bond that pays semiannual interest of $402,000 ($6,700,000 × 12% × ½), receiving cash of $6,111,341.
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.

 

check_circle

Expert Answer

Step 1

Calculate the amount of discount provided on issue of bonds as follows:

Date
Description
Post ref Debit (S)
Credit (S)
Interest on Bond
402,000
Bank
402,000
(Being Interest paid on bonds semianually recorded)
help_outline

Image Transcriptionclose

Date Description Post ref Debit (S) Credit (S) Interest on Bond 402,000 Bank 402,000 (Being Interest paid on bonds semianually recorded)

fullscreen
Step 2

Calculate the amount of discount on bonds...

Total discount
Discount (semiannually)
Number of half years in 4 year
$588,659
8
= $73,582
help_outline

Image Transcriptionclose

Total discount Discount (semiannually) Number of half years in 4 year $588,659 8 = $73,582

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Related Accounting Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: Current Attempt in Progress Sunland Company sells its product for $90 per unit. During 2019, it prod...

A: In the above equation, ending inventory under variable costing is calculated by taking the differenc...

question_answer

Q: Optima Company is a high-technology organization that produces a mass-storage system. The design of ...

A: Since we are entitled to answer up to 3 sub-parts, we’ll answer the first 3 schedules. Please resubm...

question_answer

Q: i do not understand how to solve this problem

A: Variance Analysis: Variance analysis is a budgeting tool to evaluate the difference between a budget...

question_answer

Q: Consider these transactions: (Credit account titles are automatically indented when amount is entere...

A: In the above journal entry, cash and service charges is being debited. The reason being, cash is bei...

question_answer

Q: Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and var...

A: Requirement a: Compute the variable cost per unit Zeigler Inc.

question_answer

Q: Pinned below

A: The statement of Bank reconciliation is a report that matches the money balance on an organization's...

question_answer

Q: Accounting Question

A: Hence, $226,000 is the total cost of making the units. It is obtained by the addition of direct mate...

question_answer

Q: Beth uses the net invoice method to record sales on account.  Beth made sales of $40,000 with terms ...

A: Receivables: Receivables refer to an amount to be received in future. General classifications of rec...

question_answer

Q: During 2020, Metlock, Inc. reported net sales of $2,850,900 and net income of $1,550,000. Its balanc...

A: Asset turnover ratio calculates how much the company was able to generate revenue using it's assets....