A company issued 9%, 15-year bonds with a par value of $620,000 that pay interes

Question

A company issued 9%, 15-year bonds with a par value of $620,000 that pay interest semi-annually. The current market rate is 9%. The journal entry to record each semiannual interest payment is:

Debit Bond Interest Expense $55,800; credit Cash $55,800.

Debit Bond Interest Expense $41,333; credit Cash $41,333.

Debit Bond Interest Expense $570,000; credit Cash $570,000.

Debit Bond Interest Expense $27,900; credit Cash $27,900.

No entry is needed, since no interest is paid until the bond is due.

A company issued 9%, 15-year bonds with a par value of $620,000 that pay interest semi-annually. The current market rate is 9%. The journal entry to record each semiannual interest payment is:

Explanation / Answer

each semiannual interest payment=($620,000*9%)*6/12=-$27900

Hence the journal entry is:

Bond interest expense a/c..Dr$27900

To Cash a/c..$27900

Hence the correct option is Debit Bond Interest Expense $27,900; credit Cash $27,900.

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