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Ellis issues 8.0%, five-year bonds dated January 1, 2016, with a $430,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of S466,680. The annual market rate is 6% on the issue date.

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Answer #1

Record interest payment :

Date accounts & explanation debit credit
June 30,2016 Interest expense 13532
Premium on bonds payable (466680-430000/10) 3668
Cash (430000*8%*6/12) 17200
(To record interest payment)
Dec 31,2016 Interest expense 13532
Premium on bonds payable 3668
Cash 17200
(To record interest payment)
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