Question

2) A company issued 9%, 10-year bonds with a par value of $100,000. Interest is paid semiannually. The market interest rate on the issue date was 10%, and the issuer received $95,016 cash for the bonds. Prepare a journal entry to record the issuance of the bond On the first semiannual interest date, what amount of cash should be paid to the holders of these bonds for interest? On January 1, ABC company issued a 12%, 10-year bond with a par value of $100.000. Interest is paid semiannually. The market interest rate on the bond is 11% and the issuer received $103, 769 cash for the bond. Prepare a journal entry to record the issuance of the bond. On the first semiannual interest date, what amount of cash should be paid to the holder of the bond?

Answer 1

1) Journal entry

Date	account and explanation	Debit	Credit
Jan 1	Cash	95016
	Discount on bonds payable	4984
	Bonds payable		100000

Interest paid = 100000*9%*6/12 = $4500

2) Journal entry

Date	account and explanation	Debit	Credit
Jan 1	Cash	103769
	Premium on bonds payable		3769
	Bonds payable		100000

Interest paid = 100000*12%*6/12 = $6000