1)A company issued 8%, 15-year bonds with a par value of $450,000. The current market rate is 8%. The journal entry to record each semiannual interest payment is:
- Debit Bond Interest Expense $36,000; credit Cash $36,000.
- No entry is needed, since no interest is paid until the bond is due.
- Debit Bond Interest Expense $30,000; credit Cash $30,000.
- Debit Bond Interest Expense $18,000; credit Cash $18,000.a
- Debit Bond Interest Expense $400,000; credit Cash $400,000.
2)On January 1, a company issued and sold a $394,000, 9%, 10-year bond payable, and received proceeds of $389,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
- Debit Bond Interest Expense $17,730; debit Discount on Bonds Payable $250; credit Cash $17,980.
- Debit Bond Interest Expense $17,480; debit Discount on Bonds Payable $250; credit Cash $17,730.
- Debit Bond Interest Expense $17,730; credit Cash $17,730.
- Debit Bond Interest Expense $35,460; credit Cash $35,460.
- Debit Bond Interest Expense $17,980; credit Cash $17,730; credit Discount on Bonds Payable $250.