Question

On January 1, 2019, Electro Inc. Issued $740,000 of 7.5%, four-year bonds that pay interest semiannually on June 30 and December 31. They are issued at $680,186 and their market rate is 10% at the issue date. After recording the entry for the issuance of the bonds, Bonds Payable had a balance of $740,000 and Discount on Bonds Payable had a balance of $59,814. Electro uses the effective interest bond amortization method. The first semiannual interest payment was made on June 30, 2019. Complete the necessary journal entry for the interest payment date of June 30, 2019 by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answer 1

Answer:

Interest payments =  $27,750

Bond payable discount = $6,259

Step-by-step explanation:

Interest payments = $740,000 x 7.5% x 1/2 = $27,750 (the credit to Cash).

bond interest expense = carrying value at 1/1/13 (the beginning of the period) of $680,186 x market rate of 10% x 1/2 = $34,009 (the debit to Bond interest expense).

Bond payable discount

The discount amortization  $34,009 - $27,750 = $6,259