Question

Required information Exercise 9-8A Record bonds issued at a discount and related semiannual interest (LO9-5) (The following information applies to the questions displayed below.) On January 1, 2021, Splash City issues $340,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 10%, the bonds will issue at $310.831.

Answer 1

9-8A:

Answer:

Date	Account title and Explanation	Debit	Credit
Jan 1,2021	Cash	$310,831
	Discount on bonds payable	$29,169
	Bonds payable		$340,000
	[To record issuance of bonds payable]
June 30,2021	Interest expense [310,831 x 10% x 6/12]	$15,542
	Discount on bonds payable		$242
	Cash (340,000 x 9% x 6/12)		$15,300
	[To record first semi-annual interest payment]
Dec 31,2021	Interest expense [(310,831+242) x 10% x 6/12]	$15,554
	Discount on bonds payable		$254
	Cash (340,000 x 9% x 6/12)		$15,300
	[To record second semi-annual interest payment]

9-9A:

Answer:

Date	Account title and Explanation	Debit	Credit
Jan 1,2021	Cash	$419,013
	Bonds payable		$390,000
	Premium on bonds payable		$29,013
	[To record issuance of bonds]
June 30,2021	Interest expense [419,013 x 6% x 6/12]	$12,570
	Premium on bonds payable	$1,080
	Cash [390,000 x 7% x 6/12]		$13,650
	[To record first semi-annual interest payment]
Dec 31,2021	Interest expense [(419,013-1,080) x 6% x 6/12]	$12,538
	Premium on bonds payable	$1,112
	Cash [390,000 x 7% x 6/12]		$13,650
	[To record first semi-annual interest payment]