Question

Use the following information to answer questions 54-59: Pizza Pier issues 7%, 10-year bonds with a face amount of $80,000 on January 1, 2018. Interest is paid semiannually on June 30 and December 31. Round amounts to the nearest whole dollar. 54. Record the bond issue if the market interest rate for bonds of similar risk and maturity is 8%, and they were issued for $74,564 on January 1, 2018. 55. Record the first interest payment on June 30, 2018 If the market interest rate for bonds of similar risk and maturity is 8%, and they were issued for $74,564 on January 1, 2018. 56. Record the bond issue if the market interest rate for bonds of similar risk and maturity is 7%. 57. Record the first interest payment assuming the market interest rate for bonds of similar risk and maturity is 7%.

Answer 1

54	Jan. 1, 2018	Cash	74564
		Discount on bonds payable	5436
		Bonds payable		80000
55	Jun. 30, 2018	Interest expense ($74564 x 8% x 1/2)	2983
		Discount on bonds payable		183
		Cash ($80000 x 7% x 1/2)		2800
56	Jan. 1, 2018	Cash	80000
		Bonds payable		80000
57	Jun. 30, 2018	Interest expense	2800
		Cash ($80000 x 7% x 1/2)		2800
58	Jan. 1, 2018	Cash	85951
		Premium on bonds payable		5951
		Bonds payable		80000
59	Jun. 30, 2018	Interest expense ($85951 x 6% x 1/2)	2579
		Premium on bonds payable	221
		Cash ($80000 x 7% x 1/2)		2800