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On Jan 1, 2012, Roger Company issued $2,000,000, 9%, 5-year bonds dated Jan 1, 2012, at...

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Accounting

On Jan 1, 2012, Roger Company issued $2,000,000, 9%, 5-yearbonds dated Jan 1, 2012, at 97. The bonds pay semiannual intereston Jan 1 and July 1. The company uses the straight-line method ofamortization and has a calendar year-end.

Prepare all the journal entries on the dates Jan 1 and July1.

Answer & Explanation Solved by verified expert
4.1 Ratings (501 Votes)

Transaction Date Description Debit Credit
01-Jan-12 Cash $   19,40,000
Discount on Bonds payable $         60,000
Bonds payable $   20,00,000
(Issue of bonds )
01-Jul-12 Bond interest expense $         96,000
Discount on Bonds payable $      6,000.00
Cash $         90,000
(Interest on bond paid and Discount amortized)

Working

Bond issue price (2000000/100 x 97) $ 19,40,000.00
Face value $ 20,00,000.00
Discount on Bonds payable $        60,000.00
Number of Interest payments (5 years x 2) 10
Discount to be amortized per year $          6,000.00
Interest on bond $        90,000.00
Interest expense to be recorded (90000+6000) $        96,000.00

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