Question

Oriole Corporation issued $2,88 million of 7 -year, 4% bonds dated January 1,2024, for $2,554,673. The market interest rate when the bonds were issued was 6%. Interest is payable semi-annually on January 1 and July 1 . Oriole has a December 31 year end. Prepare the journal entry to record the first interest payment on July 1, 2024.

Answer 1

To record the first interest payment on July 1, 2024, you would debit Interest Expense for the amount of interest accrued during the period and credit Cash for the actual interest payment.

Step-by-step explanation:

To record the first interest payment on July 1, 2024, you would debit Interest Expense for the amount of interest accrued during the period and credit Cash for the actual interest payment.

The interest expense can be calculated using the formula: Principal x Interest Rate x Time (in fraction of years).

So, for the Oriole Corporation bonds, the interest expense for the first interest payment on July 1, 2024, can be calculated as: $2,554,673 x 0.04 / 2 (since interest is payable semi-annually).

Therefore, the journal entry to record the first interest payment on July 1, 2024, would be:

• Debit: Interest Expense (or Bond Interest Expense) for the calculated amount
• Credit: Cash for the actual interest payment made