Question

On the first day of the fiscal year, a company issues a $3,500,000, 6%, five-year bond that pays semiannual interest of $105,000 ($3,500,000 × 6% × ½), receiving cash of $3,350,000. Journalize the first interest payment and the amortization of the related bond discount.

Answer 1

Answer: PV= 3,350,000

Fv= 3,500,000

PMT= 105,000

N= 10

YTM= 7.03%

7.03*3,500,000*0.5= 123,025

123,025-105,000= 18,025

 

                                            Debit                               Credit

Interest Expense                123,025

Cash                                                                             105,000

Discount Amortized                                                     18,025

Explanation: