Question

On January 1, 2018, Twister Enterprises, a manufacturer of a variety of transportable spin rides, issues $430,000 of 6% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year.

Required:

1. If the market interest rate is 6%, the bonds will issue at $430,000. Record the bond issue on January 1, 2018, and the first two semiannual interest payments on June 30, 2018, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

• Record the bond issue.

Note: Enter debits before credits.

	Date General Journal Debit Credit January 01, 2018

2. If the market interest rate is 7%, the bonds will issue at $384,087. Record the bond issue on January 1, 2018, and the first two semiannual interest payments on June 30, 2018, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3. If the market interest rate is 5%, the bonds will issue at $483,971. Record the bond issue on January 1, 2018, and the first two semiannual interest payments on June 30, 2018, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

1)
	Date	General Journal				Debit	credit
	1/1/2018	Cash				430,000
		bonds payable					430,000
	6/30/2018	interest expense				12900
		cash					12,900
	12/31/2018	interest expense				12900
		cash					12,900
2)
	1/1/2018	Cash				384,087
		Discount on bonds				45,913
		bonds payable					430,000
	6/30/2018	interest expense				13443
		discount on bonds					543
		cash					12900
	12/31/2018	interest expense				13462
		Discount on bonds					562
		cash					12,900
3)
	1/1/2018	Cash				483,971
		premium on bonds					53,971
		bonds payable					430,000
	6/30/2018	interest expense				12099
		premium on bonds				801
		cash					12900
	12/31/2018	interest expense				12079
		premium on bonds				821
		cash					12,900