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Untitled Document28

Untitled Document28 - Long-term liabilities Bonds Payable...

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The entry to pay interest on December 31, 20X1 would be:  Gen eral Jour nal Date Account Title and Description Ref. Debit Credit Dec. 31 Interest Expense 481 Discount on Bonds Payable (623 ÷ 20) 31 Cash ($10,000 × 9% × 6 / 12 ) 450 Pay semiannual interest using straight-line amortization After the payment is recorded, the carrying value of the bonds payable on the  balance sheet increases to $9,408 because the discount has decreased to $592  ($623–$31).
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Unformatted text preview: Long-term liabilities Bonds Payable 10,000 Less: Discount on Bonds Payable (592) 9,408 The carrying value will continue to increase as the discount balance decreases with amortization. When the bond matures, the discount will be zero and the bond's carrying value will be the same as its principal amount. The discount amortized for the last payment may be slightly different based on rounding....
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