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2 years ago

Duval Co. issues four-year bonds with a $100,000 par value

Business

1 answer:

AleksandrR [38]2 years ago

8 0

Answer:

Duval Co.

Journal Entries to record the first two interest payments:

June 30, 2019:

Debit Interest expense $4,006

Credit Cash payment $3,500

Credit Amortization of discounts $506

To record the first interest payment.

December 31, 2019:

Debit Interest expense $4,006

Credit Cash payment $3,500

Credit Amortization of discounts $506

To record the second interest payment.

December 31, 2022:

Debit Bonds Payable $100,000

Credit Cash $100,000

To record the payment on maturity of the bonds.

Explanation:

a) Data and Calculations:

Face value of bonds = $100,000

Price of the bonds = $95,952

Discounts = $4,048

Period of bonds = 4 years

Coupon rate = 7%

Semi-annual amortization of discounts = $506 ($4,048/8)

June 30:

Cash payment = $3,500 ($100,000 * 3.5%)

Amortization of discounts $506

Interest expense = $4,006

December 31:

Cash payment = $3,500 ($100,000 * 3.5%)

Amortization of discounts $506

Interest expense = $4,006

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