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General Journal Date Account Title and Description Ref. Debit Credit July 1 Bonds Payable 10,000 Cash 10,000 The effective interest method of amortizing the discount to interest expense  calculates the interest expense using the carrying value of the bonds and the  market rate of interest at the time the bonds were issued. For the first interest  payment, the interest expense is $469 ($9,377 carrying value × 10% market 
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Unformatted text preview: interest rate 6 / 12 semiannual interest). The semiannual interest paid to bondholders on Dec. 31 is $450 ($10,000 maturity amount of bond 9% coupon interest rate 6 / 12 for semiannual payment). The $19 difference between the $469 interest expense and the $450 cash payment is the amount of the discount amortized....
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This note was uploaded on 12/25/2011 for the course FIN 3312 taught by Professor Staff during the Spring '08 term at Texas State.

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