Question

On January 1, the first day of the fiscal year, a company issuesa $1,450,000, 5%, five-year bond that pays semiannual interest of$36,250 ($1,450,000 × 5% × ½), receiving cash of $1,408,720.

Journalize the first interest payment and the amortization ofthe related bond discount. Round to the nearest dollar. Refer tothe Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTSGeneral Ledger

 

ASSETS

110

Cash

111

Petty Cash

121

Accounts Receivable

122

Allowance for DoubtfulAccounts

126

Interest Receivable

127

Notes Receivable

131

Merchandise Inventory

141

Office Supplies

191

Land

194

Office Equipment

195

Accumulated Depreciation-OfficeEquipment

 

 

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 ofPar-Common Stock

315

Treasury Stock

321

Preferred Stock

322

Paid-In Capital in Excess ofPar-Preferred Stock

331

Paid-In Capital from Sale ofTreasury Stock

340

Retained Earnings

351

Cash Dividends

352

Stock Dividends

390

Income Summary

 

 

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-OfficeEquipment

590

Miscellaneous Expense

710

Interest Expense

711

Loss on Redemption of Bonds

Journalize the first interest payment and the amortization ofthe related bond discount. Round to the nearest dollar. Refer tothe Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

 

DATE

DESCRIPTION

POST.REF.

DEBIT

CREDIT

1

 

 

 

 

 

2

 

 

 

 

 

3

 

 

 

 

 

 



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