Journal entry
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On January 1, 2007, a company issued 10-year, 10% bonds payable with a par value of $500,000, and received $442,647 in cash proceeds. The market rate of interest at the date of issuance was 12%. The bonds pay interest semiannually on July 1 and January 1. The issuer uses the straight-line method for amortization. Prepare the issuer's journal entry to record the first semiannual interest payment on July 1, 2007.
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Solution Summary
The solution explains the journal entry to be made for first semi-annual interest payment.
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The face value of the bonds is 500,000 and the cash received is 442,647. This implies that the bonds are sold at a discount and the discount amount is 500,000-442,647 = 57,353. The ...
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