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On January 31, 2016, Muscle Sports Cars issued 10-year, 4% bonds with a face value of $100,000
On January 31, 2016, Muscle Sports Cars issued 10-year, 4% bonds with a face value of $100,000. The bonds were issued at 94 and pay interest on January 31 and June 30. Muscle amortizes their bonds by the straight-line method.
1. Record: (a) the issuance of the bonds on January 31, (b) the semi-annual interest payment and discount amortization on June 30, and (c) the interest accrual and discount amortization on December 31.
Expert Solution
| Journal Entry: | |||
| Date | Account Titles | Debit | Credit |
| 31-Jan | Cash (100,000*94%) | $94,000.00 | |
| Discount on Bonds Payable (100,000-94,000) | $6,000.00 | ||
| Bonds Payable | $100,000.00 | ||
| 30-Jun | Interest Expense | $1,916.67 | |
| Discount on Bonds Payable (6000/(10*2)*5/6) | $250.00 | ||
| Cash (100000*4%/2*5/6) | $1,666.67 | ||
| 31-Dec | Interest Expense | $2,300.00 | |
| Discount on Bonds Payable (6000/(10*2)) | $300.00 | ||
| Interest Payable (100,000*4%/2) | $2,000.00 | ||
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