The Simko Company's Journal Entries to record the following transactions are as follows:
a) Bond Issuance on January 1, 2021:
Debit Cash $620,000
Debit Bonds Discount $60,000
Credit Bonds Payable $680,000
- To record the issuance of bonds at a discount.
b) Payment of Interest on December 31, 2021:
Debit Interest Expense $46,000
Credit Discount Amortization $12,000
Credit Cash $34,000
- To record the payment of interest and amortization of discount.
Data and Calculations:
Bonds Face value = $680,000
Bonds Proceeds = $620,000
Bonds Discounts = $60,000 ($680,000 - $620,000)
Maturity period = 5 years
Coupon interest rate = 5%
Interest payment = annually on December 31
Amortization method = straight-line
Annual amortization = $12,000 ($60,000/5)
December 31, 2021:
Cash payment = $34,000 ($680,000 x 5%)
Discount amortization = $12,000
Interest Expense = $46,000 ($34,000 + $12,000)
Learn more: brainly.com/question/16048994
