Answer:
1. How much interest will Boston pay (in cash) to the bondholders every six months?
semiannual coupon = $2,200,000 x 9% x 1/2 = $99,000
2. Prepare journal entries to record (a) the issuance of bonds on January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31.
a) January 1, 202x, bonds issued at par
Dr Cash 2,200,000
Cr Bonds payable 2,200,000
b) June 30, 202x, first coupon payment
Dr Interest expense 99,000
Cr Cash 99,000
c) December 31, 202x, second coupon payment
Dr Interest expense 99,000
Cr Cash 99,000
3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 96 and (b) 104.
a) January 1, 202x, bonds issued at 96
Dr Cash 2,112,000
Dr Discount on bonds payable 88,000
Cr Bonds payable 2,200,000
b) January 1, 202x, bonds issued at 104
Dr Cash 2,288,000
Cr Bonds payable 2,200,000
Cr Premium on bonds payable 88,000
