Question

On January 1, 2021, Splash City issues $330,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.

Required:
1. Assuming the market interest rate on the issue date is 7%, the bonds will issue at $330,000. 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.)

Answer 1

January 01, 2021

Dr Cash $ 330,000

Cr Bonds payable $ 330,000

June 30, 2021

Dr Bond interest expense $ 11,550

Cr Cash $ 11,250

December 31, 2021

Dr Bond interest expense $ 11,550

Cr Cash $ 11,550

Step-by-step explanation:

Splash city Journal entries

January 01, 2021

Dr Cash $ 330,000

Cr Bonds payable $ 330,000

(To record Issuance of bonds )

June 30, 2021

Dr Bond interest expense $ 11,550

Cr Cash $ 11,250

(Interest on bond paid)

December 31, 2021

Dr Bond interest expense $ 11,550

Cr Cash $ 11,550

(Interest on bond paid)

Therefore Bond is often said to be issued at Par so there will be no premium or discount on bonds. The interest will be paid 3.5% on $330,000.