Using a Discount Amortization Table (Straight Line)

Panamint Candy Company prepared the following amortization table for $300,000 of 5-year, 9% bonds issued and sold by Panamint on january 1, 2021, for $285,000:

Period	Cash Payment (Credit)	Interest Expense (Debit)	Discount on Bonds Payable (Credit)	Discount on Bonds Payable Balance	Carrying Value
At issue				$15,000	$285,000
06/30/21	$13,500	$15,000	$1,500	13,500	286,500
12/31/21	13,500	15,000	1,500	12,000	288,000
06/30/22	13,500	15,000	1,500	10,500	289,500
12/31/22	13,500	15,000	1,500	9,000	291,000
06/30/23	13,500	15,000	1,500	7,500	292,500
12/31/23	13,500	15,000	1,500	6,000	294,000
06/30/24	13,500	15,000	1,500	4,500	295,500
12/31/24	13,500	15,000	1,500	3,000	297,000
06/30/25	13,500	15,000	1,500	1,500	298,500
12/31/25	13,500	15,000	1,500	0	300,000

Required:

1. Prepare the entry to recognize the sale of the bonds on january 1, 2021.

2021 Jan. 1	Cash
	Discount on Bonds Payable
	Bonds Payable
	Record issuance of bonds at discount

Feedback

1. When bonds are issued, any premium or discount is recorded in a separate valuation account.

2. Prepare the entry to recognize the first interest payment on June 30, 2021.

2021 June 30	Interest Expense
	Discount on Bonds Payable
	Cash
	Record interest expense

Feedback

2. An amortization table helps calculate the proper amortization of bond premium or discount. They are particularly helpful when the effective interest rate method is used; however, this problem amortizes the premium using the straight-line method.

3. Determine the interest expense for these bonds that Panamint will report on its 2023 income statement. $

Feedback

3. Any premium or discount is amortized to interest expense over the life of the loan.

4. Indicate how these bonds will appear in Panamint's December 31, 2024 balance sheet.

Panamint Candy Company
Balance Sheet (partial)
December 31, 2024
Bonds payable:
9% Bonds, due 2025	$
Less: Discount on Bonds Payable		$