Question

Return to question Required information [The following information applies to the questions displayed below.] Part 2 of 2 On January 1, 2021, Splash City issues $490,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. points Assuming the market interest rate on the issue date is 9%, the bonds will issue at $450,092. 2. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required in the first account field. Round your intermediate and final answers to the nearest whole dollar.) No Credit 1 * Answer is complete but not entirely correct. Date General Journal Debit January 01, 2021 Cash 450,092 Discount on Bonds Payable 39.908 Bonds Payable 490,000 2 June 30, 2021 20,254 Interest Expense Discount on Bonds Payable 3.054 X 17,200 Cash 3 20,392 % December 31, 202 Interest Expense Discount on Bonds Payable 3.192 % Cash 17,200

Answer 1

Semi annual interest payment = Par value of bonds x Interest rate x 6/12

= 490,000 x 8% x 6/12

= $19,600

Date	Cash Paid	Interest Expense	Change in Carrying Value	Carrying value
1/1/21				450,092
6/30/21	19,600	450,092 x 4.5% = 20,254	20,254-19,600 = 654	450,092+654 = 450,746
12/31/21	19,600	450,746 x 4.5% = 20,284	20,284-19,600 = 684	450,746+684 = 451,430

No	Date	General Journal	Debit	Credit
1	January 1, 2021	Cash	450,092
		Discount on bonds payable	39,908
		Bonds payable		490,000
2	June 30 , 2021	Interest expense	20,254
		Discount on bonds payable		654
		Cash		19,600
3	December 31, 2021	Interest expense	20,284
		Discount on bonds payable		684
		Cash		19,600

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