O ezto.mheducation.com/hm.tpx b.u0 poin On January 1,2016. Boston Enterprises is
ID: 2564132 • Letter: O
Question
O ezto.mheducation.com/hm.tpx b.u0 poin On January 1,2016. Boston Enterprises issues bonds that have a $2.150,000 par value, mature The bonds are sold at par 20 years, and pay 6% irterest semannualy on June 30 and December 31 1. How much interest will Boston pay (in cash) to the bondholders every six months? 2. Prepare joumal entries to record (a) the issuance of bonds on January 1, 2016; (b) the first interest payment on June 30, 2016 and (c) the second interest payment on December 31, 2016 Journal entry worksheet Record the issue of bonds at par on January 1, 2016.Explanation / Answer
1. Interest payment for every 6 months
= Par(Maturity Value) * Semi Annual Rate = Semi Annual Cash Interest Payment
= 2,150,000 * 3% = $64,500
2. Journal Entries
3.
Working Note :
1. Calculation of Number of Bonds to be issued = Par Value Bonds / Face Value of each Bond
= 2,150,000 / 100 (assuming)
= 21,500 Bonds to be issued
Date General Journal Debit Credit January 01.2016 Cash/Bank A/c Dr. 2,150,000 To 6% Bonds application and allotment A/c 2,150,000 (Being bonds application and allotment amount received in Cash/Bank) January 01,2016 6% Bonds application and allotment A/c Dr. 2,150,000 To 6% Bonds A/c 2,150,000 (Being 6% Bonds issued at Fair Value of $100) June 30,2016 Profit and Loss A/c Dr. 64,500 To Interest on Bonds A/c 64,500 (Being interest charged on the bonds semiannualy @ 3% on par value) June 30,2016 Interest on Bonds A/c Dr. 64,500 To Cash/Bank A/c 64,500 (Being Interest paid semianually) December 31,2016 Profit and Loss A/c Dr. 64,500 To Interest on Bonds A/c 64,500 (Being interest charged on the bonds semiannualy @ 3% on par value) December 31,2016 Interest on Bonds A/c Dr. 64,500 To Cash/Bank A/c 64,500 (Being Interest paid semianually)Related Questions
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