Question

On January 1, 2021, White Water issues $600,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.

 

Required:

Assuming the market interest rate on the issue date is 7%, the bonds will issue at $600,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021.

 

 

Answer 1

Date	Accounts title	Debit	Credit
01-Jan-21	Cash	$600,000
	Bonds Payable		$600,000
	(Bonds issued)
30-Jun-21	Interest Expense [600000 x 7% x 6/12]	$21,000
	Cash		$21,000
	(first semi annual interest paid)
31-Dec-21	Interest Expense [600000 x 7% x 6/12]	$21,000
	Cash		$21,000
	(second semi annual interest paid)

Date	Accounts title	Debit	Credit
01-Jan-21	Cash	$600,000
	Bonds Payable		$600,000
	(Bonds issued)