Answer:
The journal entry upon issuance of the bond is as follows:
Dr Cash $100,000
Cr Bonds payable $100,000
to record issuance of bond for cash
Journal entry for semi-annual interest
Dr Interest expense $6000
Cr Cash $6000
Being payment of bond semi-annual interest
Explanation:
Upon issuance of the bond with face value and issue price of $100,000, the cash position of the Police company increases by $100,000, hence the cash account should receive a debit of $100,000, but the issue also implies increased debt obligation, as a result , the bonds payable account is also credited with the same amount.
Concerning, the interest payment, which is an outflow of cash, the cash account is credited and the interest expense account is debited as an increase in expense.
The amount of interest is $6000(6%*$100,000).
