Question

Exercise 10-3 Recording bond issuance and interest LO P1 On January 1, Boston Enterprises issues bonds that have a $1,800,000 par value, mature in 20 years, and pay 8% interest semiannually on June 30 and December 31. The bonds are sold at par. 1. How much interest will Boston pay (in cash) to the bondholders every six months? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31. 3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 96 and (b) 104.

Answer 1

- Interest Paid Every Months = $1,800,ooo (x) 4.1 672.000 2 (a) Janually ) I Cash Bonds Payable $ 1800,000 $ 1800,oo Jure 30 Bond verest Expense Case $72000 $720vo ) coi December 31 Bond interest Expense Caser $ 72000 $72000 3 a M ) 96 Cash (1800000 x 96) Discount on Bond Reyabe (Be) Du Band Payabee co &1728,0 $ 72000 $1800,000 @ loy Case (1800000 X104) Bond kayavee Bond vee De col ci $ 1872000 $1800, ovo $ 720000 Premium on