Discount Amortization On the first day of the fiscal year, a company issues a $3,000,000, 7%, 5-year bond that pays semiannual interest of $105,000 ($3,000,000 × 7% × ½), receiving cash of $2,762,617

Finance May 21, 2021

Discount Amortization

On the first day of the fiscal year, a company issues a $3,000,000, 7%, 5-year bond that pays semiannual interest of $105,000 ($3,000,000 × 7% × ½), receiving cash of $2,762,617.

Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

Expert Solution

Journal Entry:
Date	Account Title	Debit	Credit
Jun-30	Interest Expense	128,738
	Discount on Bonds Payable		23,738
	Cash		105,000

Journal Entry:
Date	Account Title	Debit	Credit
Jun-30	Interest Expense	=105000+23738
	Discount on Bonds Payable		=(3000000-2762617)/(5*2)
	Cash		105000

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