Answer:
1. Dr Cash $2,253,934
Cr Bonds Payable $2,253,934
2. Dr Interest Expense $96,919
Dr Bonds payable $3,181
Cr Cash $100,100
3. $2,250,753
Explanation:
1. Preparation of the journal entry to record the issuance of the bonds.
January 1
Dr Cash $2,253,934
Cr Bonds Payable $2,253,934
(To record the issuance of the bonds)
2. Preparation of the journal entry to record the interest payment on June 30 of this year.
June 30
Dr Interest Expense $96,919
Dr Bonds payable $3,181
($100,100-$96,919)
Cr Cash $100,100
(To record the interest payment)
Workings:
$2,002,000 × 0.28689 = $574,354
$100,100* × 16.77902 = 1,679,580
Issue price = $2,253,934
Interest: $2,002,000 × .10 × 1/2 = $100,100
June 30:
Interest Expense: $2,253,934 × .0430 = $96,919
3. Calculation to determine what bonds payable amount will Park report on its June 30 balance sheet
Park Corporation Balance sheet (Partial) June 30
Long term Liabilities:
Bonds payable $2,250,753
($2,253,934-$3,181)
Therefore the bonds payable amount Park will report on its June 30 balance sheet is $2,250,753
