Question

On January 2017, Boston Enterprises issues bonds that have a $250.000 par value, mature in 20 years, and pay 6% interest semiannually on June 30 and December 31 The bonds are sold at pat 1. How much interest will Boston pay in cash to the bondholders every six months? 2. Prepare yournal entries to record in the issuance of bonds on January 1, 2017, the first interest payment on June 30, 2017, and (c) the second interest payment on December 31, 2017 3. Prepare the journal entry for issuance assuming the bonds are issued at a 97 and (D) 103 points Complete this question by entering your answers in the tabs below Required Required 2 red) How much interest wil Boston pay in cash) to the bondholders every months? < Prev ofis Nest ) MacBook Air caps lock control option command command optic

Answer 1

Solution Par Value of Bonds Issue price of Bonds Stated Rate of interest Semi-annual stated rate of interest (6%/2) $2,150,000 $2,150,000 6.00% 3.00% Required 1: Calculation of semi-annual interest payment in cash Par (maturity) Value $2,150,000 X X Semiannual rate = 3% Semiannual Cash interest payment - $64,500 Required 2: Journal entry Credit Date Jan. 1, 2017 Debit $2,150,000 General Journal Cash Bonds Payable (To record issue of bonds at par) $2,150,000 Credit Debit $ 64,500 Date General Journal June 30, 2017 Interest expense Cash (To record first interest payment) $64,500 Credit Date General Journal Dec. 31, 2017 Interest expense Cash (To record second interest payment) Debit $64,500 I $64,500 Required 3(a) : Journal entry to record issuance of bonds at 97 Credit Date Jan. 1, 2017 General Journal Cash ($2,150,000 x 97%) Discount on bonds payable (Bal. fig.) Bonds Payable (To record issue of bonds at 97) Debit $2,085,500 $64,500 $2,150,000 Required 3(b) : Journal entry to record issuance of bonds at 103 Credit Date Jan 1, 2017 Debit $2,214,500 General Journal Cash ($2,150,000 x 103%) Bonds Payable Premium on bonds payable (Bal. fig.) (To record issue of bonds at 103) $2,150,000 $64,500