Question

Brussels Enterprises issues bonds at par dated January 1, 2019, that have a $1,800,000 par value, mature in four years, and pay 10% interest semiannually on June 30 and December 31.
1. Record the entry for the issuance of bonds for cash on January 1.
2. Record the entry for the first semiannual interest payment and the second semiannual interest payment.

Answer 1

Answer:

The journal entries are as follows:

(i) On January 1,

Cash A/c Dr. $1,800,000

      To Bonds payable A/c         $1,800,000

(To record the issuance of bonds for cash)

(ii) On June 30th,

Interest expense A/c Dr. $90,000

          To cash A/c                          $90,000

(To record the semiannual interest payment)

(iii) On December 31st,

Interest expense A/c Dr. $90,000

          To cash A/c                          $90,000

(To record the semiannual interest payment)

Workings:

Interest expense:

= $1,800,000 × 10% × (6/12)

= $1,800,000 × 0.1 × 0.5

= $90,000