Discount amortization Using the bond from Practice Exercise 14 -3A , journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar.

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 14, Problem 14.4APE
Textbook Problem

Discount amortizationUsing the bond from Practice Exercise 14-3A, journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar.

Expert Solution
To determine

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations. Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value. To prepare: Journal entry to record first interest payment and amortization of discount on bonds. Explanation of Solution Prepare journal entry for first interest payment and amortization of discount on bonds.  Date Account Title and Explanation Post Ref Debit ($) Credit ($) Interest Expense (3) 60,940 Discount on Bonds PayableÂ (1) 10,940 Cash (2) 50,000 (To record semiannual payment of interest and amortization of discount on bonds) Table (1) Working notes: Calculate discount on bonds payable semiannually. Â DiscountÂ onÂ bondsÂ payableÂ semiannually)=Discountâ€‰onâ€‰bondsâ€‰payableâ€‰perâ€‰yearNumberâ€‰ofâ€‰semiannual=$109,40110=\$10,940Â  (1)

Calculate the amount of cash interest

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