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Chapter 10 Assignment Solution 292[1]

# Chapter 10 Assignment Solution 292[1] - Chapter 10...

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Chapter 10 Assignment Solution 292 10-19 a) The bond rate of interest is 8%. The yield rate of interest is 9%. Because the yield is greater than then bond rate the bonds would have sold for a discount. Journal entry at issue January 1, 2008: Cash (A) 908,000 Discount on bonds payable (XL) 92,000 Bonds payable (L) 1,000,000 b) Journal entries for interest expense for first six months: Interest payments: \$1,000,000 x 8% x 6/12 = \$40,000 Interest expense on June 30, 2008: \$908,000 x 9% x 6/12 = \$40,860 Journal Entry June 30, 2008: Interest expense (SE) 40,860 Discount on bond payable (XL) 860 Cash 40,000 c) Interest Expense for the second six months: (\$908,000 + 40,860 – 40,000) x 9% x 6/12 = \$40,899 Journal Entry December 31, 2008 Interest expense (SE) 40,899 Discount on bond payable (XL) 899 Cash 40,000 d) Balance in the Discount on bond payable account: Opening balance \$92,000 Less amortization first payment (860) Less amortization second payment (899) Balance December 31, 2008 \$90,241 Presentation on the balance sheet: Bonds Payable \$1,000,000 less discount on bonds payable (90,241) \$909,759

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