On July​ 1, 2025​, Leanne Nguyen Services issued $ 72000 of 15​% bonds that mature in ten years. They were issued at 105. The bonds pay semiannual interest payments on June 30 and December 31 of each year using the​ straight-line amortization method. Prepare the journal entries for the issuance of the bonds on July​ 1, 2025​, and for the first interest payment on December​ 31, 2025. ​(Record debits​ first, then credits. Exclude explanations from journal​ entries.)

Here are the journal entries for the issuance of the bonds on July 1, 2025:

July 1, 2025

   Debit: Cash                               $75,600
   Debit: Discount on Bonds Payable           $3,600
   Credit: Bonds Payable                      $72,000

Note:

• Cash received = $72,000 * 1.05 = $75,600 (issued at 105)
• Discount on Bonds Payable = $3,600 (the difference between cash received and face value: $75,600 - $72,000)

are you sure? the debits are not the same amount as the credits

I apologize for the mistake. You're correct that the debits and credits in a journal entry must balance. Here's the corrected journal entry for the issuance of the bonds on July 1, 2025:

July 1, 2025

   Debit: Cash                               $75,600
   Credit: Bonds Payable                     $72,000
   Credit: Premium on Bonds Payable          $3,600

Explanation:

• Cash: The amount received from issuing the bonds is $72,000 * 1.05 = $75,600.
• Bonds Payable: This is the face value of the bonds, which is $72,000.
• Premium on Bonds Payable: The premium on the bonds is the difference between the cash received and the face value, calculated as $75,600 - $72,000 = $3,600.

Thank you for your understanding, and I appreciate your patience. Now let's move on to the first interest payment on December 31, 2025. Would you like to proceed with that?

Yes, Journalize the semiannual interest payment and amortization of the bond discount on December​ 31, 2025.

Certainly! For the first semiannual interest payment on December 31, 2025, we also need to consider the amortization of the bond premium. Here are the calculations and the subsequent journal entry:

Calculate the Semiannual Interest Payment:

• Face Value of Bonds: $72,000
• Stated Interest Rate: 15%
• Semiannual Interest Payment: \[ \text{Semiannual Interest} = \text{Face Value} \times \left( \frac{\text{Stated Rate}}{2} \right) \] \[ = 72,000 \times 0.075 = 5,400 \]

Amortization of the Premium:

Since there is a premium of $3,600 over the life of the bond (10 years or 20 periods), the semiannual amortization will be: \[ \text{Amortization of Premium} = \frac{3,600}{20} = 180 \]

The Journal Entry for December 31, 2025:

Now we can record the semiannual interest payment and the amortization of the premium.

   Debit: Interest Expense                    $5,220
   Debit: Premium on Bonds Payable             $180
   Credit: Cash                                $5,400

Explanation:

• Interest Expense: This is the cash interest paid minus the amortization of the premium: \[ \text{Interest Expense} = \text{Semiannual Interest} - \text{Amortization of Premium} = 5,400 - 180 = 5,220 \]

• Premium on Bonds Payable: This reflects the amortization of the bond premium.

• Cash: The total cash payment for interest is $5,400.

This entry accurately reflects the interest payment and the impact of the bond premium on interest expense. Let me know if you need any further assistance!