Question

Presented below is a partial amortization schedule for Discount Foods: Interest Increase in Carrying Period Cash Paid Expense Carrying Value Value Issue Date $ 74,100 1 $ 2,700 $ 2,964 $ 264 74,364 2 2,700 2,975 275 74,639 Required: 1. & 2. Record the bond issue assuming the face value of bonds payable is $85,000 and first interest payment. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:

Dr cash                                     $74,100

Dr discount on bonds payable $10,900

Cr Bonds payable                                  $85,000

The interest expense

Dr interest expense                 $2,964

Cr discount on bonds payable              $264

Cr cash                                                    $2,700

Explanation:

From the amortization presented in the question,the present value of the bonds,which is proceeds received from bond issues was $74,100,which implies that the bonds were issued at a discount of $10,900 ($85,000-$74,100).

The entries for the bond issue would a debit of $74,100 to cash while a debit of $10,900 is posted to discount on bonds payable.The credit to bonds payable account would the face value of $85,000