Question

On January 1 of the current year, the Queen Corporation issued 7% bonds with a face value of $76,000. The bonds are sold for $73,720. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now. Queen records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31.

Answer 1

Answer:

$5,776

Explanation:

the journal entry to record the issuance of the bonds:

January 1, 202x

Dr Cash 73,720

Dr Discount on bonds payable 2,280

    Cr Bonds payable 76,000

coupon = $76,000 x 7% x 1/2 = $2,660

discount on bonds payable per coupon = $2,280 / 10 = $228

Journal entry to record coupon payment:

June 30 and December 31, 202x

Dr Interest expense 2,888 x 2 = 5,776

    Cr Cash 2,660 x 2 = 5,320

    Cr Discount on bonds payable 228 x 2 = 456