Question

2. If the market interest rate is 7%, the bonds will issue at $418,022. 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.)

Answer 1

The journal entries are as follows:

(a) On January 1, 2021

Cash A/c Dr. $418,022

To Bonds payable $418,022

(To record the issue of bond)

(b) On June 30, 2021

Interest expense A/c [$418,022 × 7%/2] Dr. $14,630.77

To cash $14,630.77

(To record the first two semiannual interest payments)

(c) On December 31, 2021

Interest expense A/c Dr. $14,630.77

To cash $14,630.77

(To record the first two semiannual interest payments)