Question

Save &Exit Submit Help Saved Check my work On January 1, 2021, Twister Enterprises, a manufacturer of a variety of transportable spin rides, issues $540,000 of 7 % bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year rt 2 of 3 2. If the market interest rate is 8 % , the bonds will issue at $503,306. 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 answers to the nearest dollar amount.) points eBook View transaction list Print References Journal entry worksheet 1 2 Record the bond issue. Note: Enter debits before credits Date General Journal Debit Credit January 01, 2021 Mc. Graw Hill Prev 9 10 of 10 Next 10

Answer 1

WORKING NOTES: 1
	Par Value of the bonds =		$5,40,000
	Issue price of the bond		$5,03,306
	Discount on issue of bonds		$36,694
	Coupon amount @ 7% =		$37,800
	Coupon amount half yearly @ 7%/2 = 3.5 %		$18,900
	Total period of bond 10 years X 2 =		20 Period
	Discount amortized = $ 36,694 / 20 Periods =		$1,834.70	Per 6 Months
WORKING NOTES: 2
	Working Notes: for calculation of the interest expenses
		Interest Expenses
		Coupon Amount =	$18,900
		Add : Amortization value	$1,835
		Total interest expesnes	$20,735
SOLUTION :
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
	Jan, 01 2021	Cash	$                       5,03,306
		Discount on issue of Bonds	$                           36,694
		To 7% Bonds		$             5,40,000
		(to record the issuance of the bonds)
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
	June, 30 2021	Interest Expenses	$                           20,735
		Discount on issue of Bonds		$                   1,835
		Cash		$                18,900
		(Record the interest expenses )
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
	Dec, 31 2021	Interest Expenses	$                           20,735
		Discount on issue of Bonds		$                   1,835
		Cash		$                18,900
		(Record the interest expenses )