Jan1, a Company issued a 12yr, 9%bond with a par value of 350,000. Company recieved 230,000 for the bonds. Using straight-line method, what the amount of intrest expense be on the 1st seminannual intrest payment?
2007-12-11 05:18:42 · 2 answers · asked by Anonymous in Business & Finance ➔ Other - Business & Finance
If you issued bonds with par value of 350,000 for only 230,000, you've issued them at a discount and this discount must be amortised over the life of the bond. Since the interest payments are semiannually, there would be 24 interest periods and the discount must be amortised over 24 periods.
When you issued the bond, you'd :
Dr Cash 230,000
Dr Bond discount 120,000
Cr Bond payable 350,000
When time comes for the 1st semiannual payment, you'd:
Dr Bond interest 20,750
Cr Bond discount 5,000
Cr Cash 15,750
The interest element is $20,750.
2007-12-12 02:38:50 · answer #1 · answered by Sandy 7 · 0⤊ 0⤋
$230,000x 9%x1/2 = $10,350
2007-12-11 21:50:36 · answer #2 · answered by supershaper83 2 · 0⤊ 0⤋