The following information applies to the questions displayed below Legacy issues

Question

The following information applies to the questions displayed below Legacy issues $550,000 of 9.5%, four-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31, They are issued at $507,301 and their market rate is 12% at the issue date. References eBook& Resources Section Break Difficulty: 3 Hard Learning Objective: 14 expense 5. value: 0.62 points 4. Prepare the journal entries to record the first two interest payments. View transaction list Journal entry worksheet 2 Record the interest payment and amortization on June 30, 2015. Note: Enter debits before credits Date General Journal Debit Credit Bond interest expense Cash Jun 30, 2015 Record entry Clear entry View general journal

Explanation / Answer

Cash payment $26125 [($550000 * 9.5%)/2]

Discount = $42699 [$550000 - $507301]

= $42699 / 8

= $5337.

June 30,2015 Interest expense $31462

To cash $26125

To discounts on bonds payable $5337.

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