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
read the requirements.
issued bonds at a discount
b. journalize the payment of interest and amortization on june 30, 2025
c. journalize the payment of interest and amortization on december 31, 2025

Explanation:

Step1: Calculate 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 (cash paid) is $I = F\times i=\$100,000\times4\%=\$4,000$

Step2: Determine amortization amount (assuming straight - line method)

Since the amortization amount on June 30, 2025 is $\$100$ (from part b, and assuming straight - line amortization of the discount over $n = 20\times2=40$ periods). The amortization amount per period is constant.

Step3: Calculate interest expense

Interest expense is the sum of the cash interest payment and the discount amortization.
Interest expense $E=I +$ Amortization.
The cash interest payment $I = \$4,000$ and the discount amortization is $\$100$ (same as in part b for straight - line method)

Answer:

Date	Accounts and Explanation	Debit	Credit
	Cash		$4,000$
	Discount on Bonds Payable		$100$
	(Paid semiannual interest and amortized discount)