Chapter 8
Non-Current Liabilities
403
AP-14A (
2
4
)
On July 1, 2016, Marky Corporation issued $1,500,000 worth of bonds with 9% interest rate.
Interest is payable semi-annually on June 30 and December 31. The bonds mature on June
30, 2023. At the time of the bond issuance, the market interest rate was 8%. Any discount or
premium resulting from the sale of the bonds will be amortized using the effective interest
method. The company’s year-end is March 31.
Required
a) Calculate the total price of the bonds on the issue date and determine the amount of a
bond discount or a bond premium.
b) Prepare the journal entries to record the issuance of the bond and the first interest payment.
Date
Account Title and Explanation
Debit
Credit
