3 Bond Problems

Note: I've kept the maturity dates very short (3 years) so you can see the entire term of the bonds and the entries made.

1. Johnson Company issues $100,000 of 6% bonds at 100 (in other words, issued at face value), with a maturity of 3 years. Show the entries for this bond, in time periods 0, 1, 2, and 3, assuming that interest is paid annually.

2. Johnson Company issues $100,000 of 6% bonds at 97, with a maturity of 3 years. Show the entries for this bond, in time periods 0, 1, 2, and 3, assuming that interest is paid annually.

3. Johnson Company issues $100,000 of 6% bonds at 103, with a maturity of 3 years. Show the entries for this bond, in time periods 0, 1, 2, and 3, assuming that interest is paid annually.

Questions:

Is interest expense equal to the cash paid out in each case above?

What constitutes interest expense?

Where are the premium and discount accounts located (A, L or SE)?