Question

on january 1, 2025, california credit union (ccu) issued 8%, 20 - year bonds payable with face value of $100,000. the bonds pay interest on june 30 and december 31
requirement 3: the issue price of the bonds is 96. journalize the bond transactions. (assume bonds payable are amortized using the straight - line amortization method. record debits first then credits. select explanation on the last line of the journal entry. round your answers to the nearest whole dollar.)
a. journalize the issuance of the bonds on january 1, 2025
date accounts and explanation debit credit
january 1, 2025 cash 96,000
discount on bonds payable 4,000
bonds payable 100,000
issued bonds at a discount
b. journalize the payment of interest and amortization on june 30, 2025
date accounts and explanation debit credit
june 30, 2025

Explanation:

Step1: Calculate the semi - annual interest payment

The face value of the bonds is $F = \$100,000$, and the annual coupon rate is $r=8\%$. The semi - annual coupon rate is $i=\frac{8\%}{2}=4\%$.
The semi - annual interest payment $C = F\times i=\$100,000\times4\%=\$4,000$

Step2: Calculate the semi - annual discount amortization

The bonds are issued at 96. The issue price $P = 100000\times0.96=\$96,000$. The discount on bonds payable $D=100000 - 96000=\$4,000$
The bonds have a 20 - year maturity, so the number of semi - annual periods $n = 20\times2=40$
The semi - annual discount amortization $A=\frac{D}{n}=\frac{4000}{40}=\$100$

Step3: Calculate the interest expense

The interest expense $E = C+A$
$E=\$4,000+\$100=\$4,100$

Answer:

Date	Accounts and Explanation	Debit	Credit
	Discount on Bonds Payable		100
	Cash		4000
	(To record interest payment and discount amortization)