Question

Page 5 of 7 (3) On December 31, 2018, when the market interest rate is 16%. BMCC Realty issue 83,000 of 10%, 10 year bonds payable. The bonds pay interest semiannually. BMCC Realty received 62.433 in cash at issuance. Requirements 1 Record the entry for the issued of the bonds. 2 Record the interest payments for the year 2019.

Answer 1

Par value of bonds = $83,000

Cash received on issuance of bonds = $62,433

Discount on bonds payable = Par value of bonds - Cash received on issuance of bonds

= 83,000-62,433

= $20,567

Journal
Date	General Journal	Debit	Credit
December 31, 2018	Cash	$62,433
	Discount on bonds payable	$20,567
	Bonds payable		$83,000

2.

Journal
Date	General Journal	Debit	Credit
June 30, 2019	Interest expense	$4,495
	Discount on bonds payable		$845
	Cash		$4,150
December 31, 2019	Interest expense	$4,927
	Discount on bonds payable		$777
	Cash		$4,150

Semi annual interest payment = 83,000 x 10% x 6/12

= $4,150

Date	Cash Paid	Interest Expense	Discount Amortized	Carrying Value of Bonds
December 311, 2018				62,433
June 30, 2019	4,150	62,433 x 8% = 4,995	4,995-4,150 =845	62,433-845 = 61,588
December 31, 2019	4,150	61,588 x 8% = 4,927	4,927-4,150 = 777	61,588-777 = 60,811

Kindly comment if you need further assistance. Thanks‼!