On January 1, 2010, Diego Corporation sold a $300,000, 8%, 5-year bond at a market rate of 7%. Interest is payable semiannually. The following present value factors may be necessary:

Required:
a. Prepare a journal entry for the issuance of the bond.
b. Regardless of your answer to (a), assume that the issue price of the bonds was $308,000. Prepare the first three interest expense entries for the bonds and the amortization of the discount using the effective interest method.
c. Using the information from (b), how would this bond be shown on a June 30, 2011, balance sheet?

Question

On January 1, 2010, Diego Corporation sold a $300,000, 8%, 5-year bond at a market rate of 7%. Interest is payable semiannually. The following present value factors may be necessary:
  
Required:
a.	Prepare a journal entry for the issuance of the bond. 
b.	Regardless of your answer to (a), assume that the issue price of the bonds was $308,000. Prepare the first three interest expense entries for the bonds and the amortization of the discount using the effective interest method.
c.	Using the information from (b), how would this bond be shown on a June 30, 2011, balance sheet?

Quizplus · Accepted Answer

The Answer of On January 1, 2010, Diego Corporation sold a $300,000, 8%, 5-year bond at a market rate of 7%. Interest is payable semiannually. The following present value factors may be necessary:
  
Required:
a.	Prepare a journal entry for the issuance of the bond. 
b.	Regardless of your answer to (a), assume that the issue price of the bonds was $308,000. Prepare the first three interest expense entries for the bonds and the amortization of the discount using the effective interest method.
c.	Using the information from (b), how would this bond be shown on a June 30, 2011, balance sheet?

On January 1, 2010, Diego Corporation Sold a $300,000, 8