Benny\'s Hamburgers issued 5%, 10-year bonds payable at 90 on December 31, 2018.

Question

Benny's Hamburgers issued 5%, 10-year bonds payable at 90 on December 31, 2018. At December 31, 2020, Benny reported the bonds payable as follows: Benny's pays semiannual interest each June 30 and December 31, (Assume bonds payable are amortized using the straight-line amortization method.) EE (Click the icon to view the bonds payable.) Read the requirements. Requirement 1. Answer the following questions about Benny's bonds payable: a. What is the maturity value of the bonds?S b. What is the carrying amount of the bonds at December 31, 2020? $ c. What is the semiannual cash interest payment on the bonds? $ d. How much interest expense should the company record each year?$ Requirement 2. Record the June 30, 2020, semiannual interest payment and amortization of discount. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Date 2020 Jun. 30 Accounts and Explanation Debit Credit Choose from any list or enter any number in the input fields and then continue to the next question.

Explanation / Answer

Req a: Maturity Value of Bonds: $ 700,000 Req b: Carrying value of Bonds: $ 644000 Req c: Semi Annual Cash interest: 700,000*5%*6/12 = 17500 Req D: Semi annual cash interest paid twice(17500*2) 35000 Add: Discount amortized each year (70000/10) 7000 Total Interest expense for the year 42000 Journal entry for interst: 30.06.20 Interest expense Account Dr. 21000     Cash account (700000*5%*6/12) 17500     Discount on Bonds payable (70000/20) 3500

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