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Connect Home Welcome to attnet + search No results Options v e Homework Exercise 10-1 Recording bond issuance and interest LO P1 On January 1, 2017, Boston Enterprises issues bonds that have a $1,450,000 par value, mature In 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par. 1. How much interest will Boston pay (in cash) to the bondholders every slx months? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2017: (b) the first interest payment on June 30, 2017; a the second interest payment on December 31, 2017 3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 95 and (b) 105 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 How much interest will Boston pay (in cash) to the bondholders every six months? r (maturityl Value Required2Explanation / Answer
January 1, 20117
Bonds Issued at Par
$ 1,450,000
Maturity Period
20 years
Rate of Interest
9% p.a.
Interest Payable
Semi-annually
1. Amount of Interest
= 1,450,000 * 9% *6/12
$ 65,250
The amount of interest to be paid to bondholders every six months is $65,250
Journal Entries
Particulars
Debit
Credit
2.a.
Bank
$ 1,450,000
To 9% Bonds
$ 1,450,000
2.b. Interest June 30
Interest Expense
$ 65,250
To Bank
$ 65,250
Interest December 31
Interest Expense
$ 65,250
To Bank
$ 65,250
3. a.
Bank
$ 1,377,500
=1,450,000 * 95 /100
Discount on Issue of Bonds
$ 72,500
To 9% Bonds
$ 1,450,000
3. b.
Bank
$ 1,522,500
=1,450,000*105/100
To 9% Bonds
$ 1,450,000
To Premum on Issue of Bonds
$ 72,500
January 1, 20117
Bonds Issued at Par
$ 1,450,000
Maturity Period
20 years
Rate of Interest
9% p.a.
Interest Payable
Semi-annually
1. Amount of Interest
= 1,450,000 * 9% *6/12
$ 65,250
The amount of interest to be paid to bondholders every six months is $65,250
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