Question

On January 1, $500,000 of 8%, 10-year bonds were sold for $530,000. The bonds require semiannual interest payments on June 30 and December 31. What's the correct entry for recording the June 30 interest payment on the bonds?

Answer 1

Answer and Explanation:

The journal entry is given below:

Date       Accounting & Explanation       Debit ($)      Credit ($)

30th June     Expenses account interest   18,500

                     Amortization of the bonus

                       premium due will be:

                                    $(\frac{30000}{20} )$                         1,500

                            Accounts cash:

                     $(500000\times 8 \ percent\times \frac{6}{12})$                            20,000