The Gorman Group issued $920,000 of 9% bonds on June 30, 2016, for $1,011,047. T

Question

The Gorman Group issued $920,000 of 9% bonds on June 30, 2016, for $1,011,047. The bonds were dated on June 30 and mature on June 30, 2036 (20 years). The market yield for bonds of similar risk and maturity is 8%. Interest is paid semiannually on December 31 and June 30.

Complete the below table to record the company's journal entry. (Enter interest rate to 1 decimal place. (i.e. 0.123 should be entered as 12.3).)

Prepare the journal entry to record their issuance by The Gorman Group on June 30, 2016, interest on December 31, 2016 and interest on June 30, 2017 (at the effective rate). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1.Record the issuance of the bond on June 30, 2016.

2.Record the interest on December 31, 2016 (at the effective rate).

3.Record the interest on June 30, 2017 (at the effective rate).

Explanation / Answer

Dr ($) Cr($) 30.06.2016 Bank A/c Dr 1011047 To Debenture(FinancialLiability) A/c 1011047 31.12.2016 Interest A/c Dr. 40441.87 [1011047*.08/2] To Debenture(FinancialLiability) A/c 40441.87 (Being Intt Booked) 31.12.2016 Debenture(FinancialLiability) A/c 41400 [920000*.09/2] To Bank 41400 30.06.2017 Interest A/c Dr. 40403.54 [(1011047+40441.87-41400)*.08/2] To Debenture(FinancialLiability) A/c 40403.54 (Being Intt Booked) 30.06.2017 Debenture(FinancialLiability) A/c 41400 [920000*.09/2] To Bank 41400

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