[cpa1988]

On January 2, Vole Co. issued bonds with a face value of $480,000 at a discount to yield 10%. The bonds pay interest semiannually. On June 30, Vole paid bond interest of $14,400. After Vole recorded amortization of the bond discount of $3,600, the bonds had a carrying amount of $363,600. What amount did Vole receive upon issuing the bonds?

a. $480,000

b. $360,000

c. $367,200

d. $476,400

I understand how to get to the answer of 360,000. However, can someone please help me figure out what the journal entry would be here.

[jbarwick]

At Issuance:

DR – Cash 360,000

DR – Discount on Bonds Payable 120,000

CR – Bonds Payable 480,000

On June 30:

DR – Bond Interest Expense 14,400

CR – Discount on Bonds 3,600

CR – Cash 10,800

Issuance should be pretty basic. Cash received, Bond Discount, then the associated Bonds Payable over time.

At the interest period, they give you the interest expense of 14,400 and the adjustment to discount of 3,600 with the other piece of the entry to cash paid of 10,800.

Journey Started - January 2015
FAR - 4/2015 - Passed
AUD - 7/2015 - Passed
BEC - 8/2015 - Passed
REG - 11/12/2015 - Passed

[Author]

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