Ask Question
8 August, 04:02

Assuming the market interest rate on the issue date is 9%, the bonds will issue at $340,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021.

+1
Answers (1)
  1. 8 August, 07:15
    0
    Journal entries for the issue of bond:

    Dr Cash $340,000

    Cr Bonds payable $340,000

    Being issue of bonds to investors

    Interest payment on 30 June, 2021

    Dr Interest expense $15,300

    Cr Cash $15,300

    Being payment of interest on bond

    Interest payment on 31 December, 2021

    Dr Interest expense $15,300

    Cr Cash $15,300

    Being payment of interest on bond

    Explanation:

    The bond issue brings a cash inflow of $340,000, an increase in cash which should debited to cash and credited to bonds payable account confirming that an amount of $340,000 is owed to the bondholders.

    Assuming the market interest rate of 9% is the same as the coupon interest rate, the semi-annual interest is calculated thus:

    9%*$340,000*6/12=$ 15,300.00

    The interest is for six months hence the need to prorate the interest.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Assuming the market interest rate on the issue date is 9%, the bonds will issue at $340,000. Record the bond issue on January 1, 2021, and ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers