Question
Duval Company issues four-year bonds with a $109,000 par value on January 1, 2021, at a price of $104,910. The annual contract rate is 5%, and interest is paid semiannually on June 30 and December 31. 2. Prepare journal entries to record the first two interest payments.
Answers
GPT 3.5
To record the first interest payment on June 30, 2021:
June 30, 2021:
Interest Expense 2,180 (($109,000 x 0.05) / 2)
Discount on Bonds Payable 270 (($109,000 - $104,910) / 8)
Cash (Interest Payment) 1,910 (($109,000 x 0.05) / 2 - (($109,000 - $104,910) / 8))
To record the second interest payment on December 31, 2021:
December 31, 2021:
Interest Expense 2,180 (($109,000 x 0.05) / 2)
Discount on Bonds Payable 270 (($109,000 - $104,910) / 8)
Cash (Interest Payment) 1,910 (($109,000 x 0.05) / 2 - (($109,000 - $104,910) / 8))
June 30, 2021:
Interest Expense 2,180 (($109,000 x 0.05) / 2)
Discount on Bonds Payable 270 (($109,000 - $104,910) / 8)
Cash (Interest Payment) 1,910 (($109,000 x 0.05) / 2 - (($109,000 - $104,910) / 8))
To record the second interest payment on December 31, 2021:
December 31, 2021:
Interest Expense 2,180 (($109,000 x 0.05) / 2)
Discount on Bonds Payable 270 (($109,000 - $104,910) / 8)
Cash (Interest Payment) 1,910 (($109,000 x 0.05) / 2 - (($109,000 - $104,910) / 8))