exercise 14 - 3 (algo) recording bond issuance and interest lo p1\non january 1, boston enterprises issues…

exercise 14 - 3 (algo) recording bond issuance and interest lo p1\non january 1, boston enterprises issues bonds that have a $2,150,000 par value, mature in 20 years, and pay 6% interest semiannually on june 30 and december 31. the bonds are sold at par.\ncomplete this question by entering your answers in the tabs below.\nrequired 1 required 2 required 3\nprepare journal entries to record (a) the issuance of bonds on january 1, (b) the first interest payment on june 30 and (c) the second interest payment on december 31.\nview transaction list\njournal entry worksheet\n< 1 2 3\nrecord the issue of bonds at par on january 1.\nnote: enter debits before credits.\ndate general journal debit credit\njanuary 01

exercise 14 - 3 (algo) recording bond issuance and interest lo p1\non january 1, boston enterprises issues bonds that have a $2,150,000 par value, mature in 20 years, and pay 6% interest semiannually on june 30 and december 31. the bonds are sold at par.\ncomplete this question by entering your answers in the tabs below.\nrequired 1 required 2 required 3\nprepare journal entries to record (a) the issuance of bonds on january 1, (b) the first interest payment on june 30 and (c) the second interest payment on december 31.\nview transaction list\njournal entry worksheet\n< 1 2 3\nrecord the issue of bonds at par on january 1.\nnote: enter debits before credits.\ndate general journal debit credit\njanuary 01

Answer

Explanation:

Step1: Record bond issuance

When bonds are issued at par, cash is debited for the amount received and bonds payable is credited for the par - value of the bonds. The par - value of the bonds is $2,150,000.

Date General Journal Debit Credit
January 01 Cash $2,150,000
Bonds Payable $2,150,000

Step2: Calculate semi - annual interest payment

The annual interest rate is 6%, so the semi - annual interest rate is $\frac{6%}{2}=3%$. The semi - annual interest payment is calculated as the par - value of the bonds multiplied by the semi - annual interest rate. $I = 2150000\times0.03=$64,500$.

Step3: Record first interest payment

On June 30, interest expense is debited and cash is credited for the semi - annual interest payment.

Date General Journal Debit Credit
June 30 Interest Expense $64,500
Cash $64,500

Step4: Record second interest payment

On December 31, the same process is followed for the second semi - annual interest payment.

Date General Journal Debit Credit
December 31 Interest Expense $64,500
Cash $64,500

Answer:

Date General Journal Debit Credit
January 01 Cash $2,150,000
Bonds Payable $2,150,000
June 30 Interest Expense $64,500
Cash $64,500
December 31 Interest Expense $64,500
Cash $64,500