ACCT 240 004 11 22 Notes Chapter 10 Reporting and Interpreting Bonds cont The person selling a bond at 100 000 at par Cash 100 000 Bonds payable 100 000 Every time interest payed Interest Expense 5000 Cash 5000 When Matured Bonds Payable 100 000 Cash 100 000 Will be selling at a discount Add together the Present value of the principle and the resent value of the interest and you ll get the price you should get the bond issue price To record issuing the bond at a discount Cash 88 530 Discount on Bonds Payable Contra Liability 11 470 Bonds Payable 100 000 Reporting Interest Expense Straight line Amortization Total discount number of interest periods discount amortization on each payment When paid interst Interest Expense 5574 Discount on bonds payable 574 Cash 5000 E10 8 On January 1 2011 Clearwater Corporation sold a 750 000 8 percent bond issue 9 percent market rate The bonds were dated January 1 2011 pay interest each December 31 and mature in 10 years Issue Price PV Principle 750 000 x 0 4224 316 800 PV of interest 60 000 x 6 4177 385 62 Journal entry when issued Cash 701 862 Discount on Bonds Payable 48 138 Bonds Payable 750 000 Each time interest paid Interest Expense 64813 8 Discount on bonds payable 4813 8 Cash 60 000 December 31st 2011 balance sheet LTLs Bonds payable 750 000 due dec 31 2020 Less Bond Discount 48138 x 9 43324 2 Total L T Liabilities 706 675 8
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