Journal entry at the date of the bond issuance


Problem: On January 1, 2007, Aumont Company sold 12% bonds having a maturity value of $500,000 for $537,907.37, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2007, and mature January 1, 2012, with interest payable December 31 of each year. Aumont Company allocates interest and unamortized discount or premium on the effective interest
basis.

Instructions:

(a) Prepare the journal entry at the date of the bond issuance.

(b) Prepare a schedule of interest expense and bond amortization for 2007-2009.

(c) Prepare the journal entry to record the interest payment and the amortization for 2007.

(d) Prepare the journal entry to record the interest payment and the amortization for 2009.

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Accounting Basics: Journal entry at the date of the bond issuance
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