Question

On January 1, 2018, Twister Enterprises, a manufacturer of a variety of transportable spin rides, issues $500,000 of 7% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year.

Required: 1. If the market interest rate is 7%, the bonds will issue at $500,000. Record the bond issue on January 1, 2018, and the first two semiannual interest payments on June 30, 2018, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 3 Record the bond issue. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2018 Record entry Clear entry View general journal

Answer 1

	WORKING NOTES:
		Par value of the bonds	$5,00,000
		Coupon rate =	7.0%
		Interest Amount	$35,000
		Half yearly amount = $ 35,000 /2 =	$17,500
	SOLUTION:
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	January 01, 2018	Cash	$5,00,000
		Bonds Payable		$5,00,000
		(Record the bond issue)
2	June 30, 2018	Interest Expenses	$17,500
		Cash		$17,500
		(Record the interest expenses for june 30)
3	December 31, 2018	Interest Expenses	$17,500
		Cash		$17,500
		(Record the interest expenses for Dec 31)