Asked by Huseyin Baykal on May 09, 2024
Verified
On the first day of the fiscal year, a company issues a $1,000,000, 7%, five-year bond that pays semiannual interest of $35,000
($1,000,000 × 7% × 1/2), receiving cash of $884,171. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answers to the nearest dollar.
Semiannual Interest
Interest that is calculated and paid twice a year on an investment or loan.
Bond Discount
The financial difference that arises when a bond is sold for an amount below its official face value.
Straight-line Method
A technique for determining depreciation or amortization by uniformly distributing the asset’s cost throughout its lifespan.
- Familiarize oneself with the primary principles and sequences in the process of bond issue, including the execution of interest payments and the amortization of bond discounts and premiums.
Verified Answer
MK
Learning Objectives
- Familiarize oneself with the primary principles and sequences in the process of bond issue, including the execution of interest payments and the amortization of bond discounts and premiums.