Question

On January 1, 2015, Providence, Inc., issues $1,000,000 of 10 percent, 5-year bonds. Providence makes the first semiannual interest payment on June 30, 2015. Complete the necessary journal entry for June 30, 2015 by selecting the account names and dollar amounts from the drop-down menus.

Answer 1

On June 30, 2015

At the moment of record the first interest payment

Debit $50,000 Bond Interest Expense

Credit $50,000 Cash

Step-by-step explanation:

If the company pays 10% of annual interest it means that the semiannual payment on interest will be $1,000,000 * 0,10 = $100,000 / 2, because it's semiannual payments.

Therefore, the journal entries for these transactions are:

On January 1, 2015

• It the moment of the bond issued the company register:

Debit $1,000,000 Cash

Credit $1,000,000 Bonds Payable

On June 30, 2015

• At the moment of record the first interest payment

Debit $50,000 Bond Interest Expense

Credit $50,000 Cash