Shawn issues $100,000 10 % par value bonds for $96,156. The bonds have a 4 year...

Shawn issues $100,000 10 % par value bonds for $96,156. The bonds have a 4 year life with semiannual interest payments. Record the entry on the issue date, the first interest payment, and the entry to retire the bonds. What will be the total interest payments for this bond?

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Expert Solution

Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Cash account			96156
	Discount on bonds payable		3844
	Bonds payable				100000
	(for issuance of bonds)

b.	Interest expense			5480.5
	Cash account (100,00010%6/12)		5,000
	Discount on bonds payable (3844/8)		480.5
	(for interst payment made)

c.	Bonds payable			1,00,000
	Cash account				1,00,000
	(for retirement of bonds)

Total Interest payment
8 payments of 5000 each	40,000
Maturity amount paid	1,00,000
Total repayment		1,40,000
Less: Amount borrowed	96,156
Total Interest payment	43,844

ekkarill92 answered 1 year ago

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