On the first day of its fiscal year, Ebert Company issued $16,000,000 of 5-year, 10% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $14,822,472. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank Use these accounts to journalize: Cash Discount on Bonds Payable Bonds Payable 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Use these accounts to journalize: interest Expense Discount on Bonds Payable Cash 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Use these accounts to journalize: Interest Expense Discount on Bonds Payable Cash B. Compute the amount of the bond interest expense for the first year. Round to the nearest dollar. Annual interest paid: Discount amortized: Interest expense for first year:
Amortize Discount by Interest Method
On the first day of its fiscal year, Ebert Company issued $16,000,000 of 5-year, 10% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $14,822,472. The company uses the interest method.
a.
1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank
Use these accounts to journalize:
- Cash
- Discount on Bonds Payable
- Bonds Payable
2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Use these accounts to journalize:
- interest Expense
- Discount on Bonds Payable
- Cash
3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Use these accounts to journalize:
- Interest Expense
- Discount on Bonds Payable
- Cash
B. Compute the amount of the bond interest expense for the first year. Round to the nearest dollar.
Annual interest paid:
Discount amortized:
Interest expense for first year:
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