Question

On January 1, 2021, Twister Enterprises, a manufacturer of a variety of transportable spin rides, issues $460,000 of 6% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. 2. If the market interest rate is 7%, the bonds will issue at $410,883. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. On January 1, 2021, Twister Enterprises, a manufacturer of a variety of transportable spin rides, issues $460,000 of 6% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. 3. If the market interest rate is 5%, the bonds will issue at $517,736. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021

Answer 1

Ques 1:-

The required journal entries for the given transactions are shown as follows:-

Journal Entries (Amounts in $)

Date	Account Titles and Explanations	Debit	Credit
Jan 1, 2021	Cash	410,883
	Discount on Bonds Payable (460,000-410,883)	49,117
	Bonds Payable		460,000
	(To record the issue of bonds payable)
June 30, 2021	Interest Expense (410,883*7%*6/12)	14,381
	Discount on Bonds Payable (14,381-13,800)		581
	Cash (460,000*6%*6/12)		13,800
	(To record the first semi annual interest payment)
Dec 31, 2021	Interest Expense [(410,883+581)*7%*6/12]	14,401
	Discount on Bonds Payable (14,401-13,800)		601
	Cash (460,000*6%*6/12)		13,800
	(To record the second interest payment)

Ques 2:-

The required journal entries for the given transactions are shown as follows:-

Journal Entries (Amounts in $)

Date	Account Titles and Explanations	Debit	Credit
Jan 1, 2021	Cash	517,736
	Premium on Bonds Payable (517,736-460,000)		57,736
	Bonds Payable		460,000
	(To record the issue of bonds payable)
June 30, 2021	Interest Expense (517,736*5%*6/12)	12,943
	Premium on Bonds Payable (13,800-12,943)	857
	Cash (460,000*6%*6/12)		13,800
	(To record the first semi annual interest payment)
Dec 31, 2021	Interest Expense [(517,736-857)*5%*6/12]	12,922
	Premium on Bonds Payable (13,800-12,922)	878
	Cash (460,000*6%*6/12)		13,800
	(To record the second interest payment)