On July 1, 2016, Flay Foods issued $100 million of its 8%, bonds for $92 million

Q: On July 1, 2016, Flay Foods issued $100 million of its 8%, bonds for $92 million

Solution:- Please Rate or comment if you have any doubt regarding this solution. Requirement Account titles and explanation Debit Credit 1. Interest expense (5% x $92 million) 4,600,000 Discount on bonds payable (difference) 600,000 Cash (4% x $100 million) 4,000,000 2. Interest expense (5% x [$92 million + .6 million]) 4,630,000 Discount on bonds payable (difference) 630,000 Cash (4% x $100 million) 4,000,000

ID: 2600750 • Letter: O

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On July 1, 2016, Flay Foods issued $100 million of its 8%, bonds for $92 million. The bonds were priced to yield 10%. The bonds are dated July 1, 2016. Interest is payable semiannually on December 31 and June 30. Flay records interest at the effective rate. Flay records interest at the effective rate. Required: 1. Prepare the journal entry to record interest on December 31, 2016 (the first interest payment). 2. Prepare the journal entry to record interest on June 30, 2017 (the second interest payment).

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Requirement Account titles and explanation Debit Credit 1. Interest expense (5% x $92 million) 4,600,000 Discount on bonds payable (difference) 600,000 Cash (4% x $100 million) 4,000,000 2. Interest expense (5% x [$92 million + .6 million]) 4,630,000 Discount on bonds payable (difference) 630,000 Cash (4% x $100 million) 4,000,000

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On July 1, 2016, Flay Foods issued $100 million of its 8%, bonds for $92 million

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