A company issued 8%, 15-year bonds with a par value of $610,000 that pay interes

ID: 2516134 • Letter: A

Question

A company issued 8%, 15-year bonds with a par value of $610,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment is

a) Debit Bond Interest Expense $24,400; credit Cash $24,400.
b) Debit Bond Interest Expense $48,800; credit Cash $48,800.
c) Debit Bond Interest Payable $40,667; credit Cash $40,667.
d) Debit Bond Interest Expense $560,000; credit Cash $560,000.
e) No entry is needed, since no interest is paid until the bond is due.

Explanation / Answer

Answer is A

General Journal Debit Credit Bond Interest Expense($610,000 * 8% * 6/12) $24,400 Cash $24,400

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A company issued 8%, 15-year bonds with a par value of $610,000 that pay interes

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