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:

Prepare the journal entry to record interest expense on December 31, 2016.

Journal Date Description Debit Credit 2016 Dec. 31 Interest expense Cash Discount on bonds payableBerol Corporation Balance Sheet (Partial) December 31, 2016 Bonds payable Less: Discount on bonds payable V