Question

On January 1, 2021, Twister Enterprises, a manufacturer of a variety of transportable spin rides, issues $460,000 of 6% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year.

1. If the market interest rate is 6%, the bonds will issue at $460,000. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

2. If the market interest rate is 7%, the bonds will issue at $410,883. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest dollar amount.)

3. If the market interest rate is 5%, the bonds will issue at $517,736. Record the bond issue on January 1, 2021, and the first two semiannual interest payments on June 30, 2021, and December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest dollar amount.)

Answer 1

Journal Entries- Case-1 - Issuance of Bond
Date	Account Tittle	Debit	Credit
1/12/2021	Cash	$460,000.00
	Bond Payable		$460,000.00
	TO Record issuance of Bond
30/06/21	Interest Expense	$13,800.00
	Cash		$13,800.00
	TO Record Interet Expense
31/12/2021	Interest Expense	$13,800.00
	Cash		$13,800.00
	TO Record Interet Expense

Journal Entries- Case-2 - - Issuance of Bond
Date	Account Tittle	Debit	Credit
1/12/2021	Cash	$410,883.00
	Discount on Bond Payable	$49,117.00
	Bond Payable		$460,000.00
	TO Record issuance of Bond
30/06/21	Interest Expense	$14,380.91
	Amortisation of Discount		$580.91
	Cash		$13,800.00
	TO Record Interet Expense
31/12/2021	Interest Expense (410883+580.91)*3.5%	$14,401.24
	Amortisation of Discount		$601.24
	Cash		$13,800.00
	TO Record Interet Expense

Journal Entries- Case-3 -- Issuance of Bond
Date	Account Tittle	Debit	Credit
1/1/2021	Cash	$517,736.00
	Premium on Bond Payable		$57,736.00
	Bond Payable		$460,000.00
	TO Record issuance of Bond
30/06/21	Interest Expense	$12,943.40
	Amortisation of Premum	$856.60
	Cash		$13,800.00
	TO Record Interet Expense
31/12/21	Interest Expense (517736-856)*2.5%	$12,922.00
	Amortisation of Premum	$878.00
	Cash		$13,800.00
	TO Record Interet Expense