Question

A company issued 7%, 15-year bonds with a par value of $480,000 that pay interest semiannually. The market rate on the date of issuance was 7%. The journal entry to record each semiannual interest payment is:

Answer 1

Interest Expense $16,800

To Cash $16.800

(Being the interest payment is recorded)

Step-by-step explanation:

The journal entry to record semiannual interest payment is shown below:

Interest Expense $16,800

To Cash $16.800

(Being the interest payment is recorded)

For computing this we debited the interest expense as it increased the expenses and credited the cash as it decreased the assets

The computation is shown below:

= Par value × rate of interest × number of months ÷ total number of months

= $480,000 × 7% × 6 months ÷ 12 months

= $16,800

Since it is semi annual so we take the 6 months