Discount Amortization On January 1, the first day of the fiscal year, a company issues a $1,550,000, 12%, five-year bond that pays semiannual interest of $93,000 ($1,550,000 × 12% × ½), receiving cash of $1,503,140. Required: Journalize the first interest payment and the amortization of the related bond discount. Refer to the chart of accounts for the exact wording of the account titles. CHART OF ACCOUNTSGeneral Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 191 Land 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 535 Rent Expense 536 Insurance Expense 537 Office Supplies Expense 541 Bad Debt Expense 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense 711 Loss on Redemption of Bonds JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3
Discount Amortization On January 1, the first day of the fiscal year, a company issues a $1,550,000, 12%, five-year bond that pays semiannual interest of $93,000 ($1,550,000 × 12% × ½), receiving cash of $1,503,140. Required: Journalize the first interest payment and the amortization of the related bond discount. Refer to the chart of accounts for the exact wording of the account titles. CHART OF ACCOUNTSGeneral Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 191 Land 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 535 Rent Expense 536 Insurance Expense 537 Office Supplies Expense 541 Bad Debt Expense 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense 711 Loss on Redemption of Bonds JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Discount Amortization
On January 1, the first day of the fiscal year, a company issues a $1,550,000, 12%, five-year bond that pays semiannual interest of $93,000 ($1,550,000 × 12% × ½), receiving cash of $1,503,140.
Required:
Journalize the first interest payment and the amortization of the related bond discount. Refer to the chart of accounts for the exact wording of the account titles. |
CHART OF ACCOUNTSGeneral Ledger
ASSETS | |
110 | Cash |
111 | Petty Cash |
121 | |
122 | Allowance for Doubtful Accounts |
126 | Interest Receivable |
127 | Notes Receivable |
131 | Merchandise Inventory |
141 | Office Supplies |
191 | Land |
194 | Office Equipment |
195 |
LIABILITIES | |
210 | Accounts Payable |
221 | Salaries Payable |
231 | Sales Tax Payable |
232 | Interest Payable |
241 | Notes Payable |
251 | Bonds Payable |
252 | Discount on Bonds Payable |
253 | Premium on Bonds Payable |
EQUITY | |
311 | Common Stock |
312 | Paid-In Capital in Excess of Par-Common Stock |
315 | |
321 | |
322 | Paid-In Capital in Excess of Par-Preferred Stock |
331 | Paid-In Capital from Sale of Treasury Stock |
340 | |
351 | Cash Dividends |
352 | Stock Dividends |
REVENUE | |
410 | Sales |
610 | Interest Revenue |
611 | Gain on Redemption of Bonds |
EXPENSES | |
510 | Cost of Merchandise Sold |
515 | Credit Card Expense |
516 | Cash Short and Over |
522 | Office Salaries Expense |
531 | Advertising Expense |
532 | Delivery Expense |
533 | Repairs Expense |
535 | Rent Expense |
536 | Insurance Expense |
537 | Office Supplies Expense |
541 | |
562 | Depreciation Expense-Office Equipment |
590 | Miscellaneous Expense |
710 | Interest Expense |
711 | Loss on Redemption of Bonds |
JOURNAL
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
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