Impact of a Discount

Berol Corporation sold 20-year bonds on January 1, 2016. The face value of the bonds was $100,000, and they carry a 9% stated rate of interest, which is paid on December 31 of every year. Berol received $93,080 in return for the issuance of the bonds when the market rate was 10%. Any premium or discount is amortized using the effective interest method.

Required:

1.Prepare the journal entry to record the sale of the bonds on January 1, 2016.

Journal Date Description Debit Credit 2016 Jan. 1 Cash Discount on bonds payable Bonds payableBerol Corporation Balance Sheet (Partial) January 1, 2016 Bonds payable Less: Discount on bonds payable V LA