A company issued 8%,15-year bonds with a par value of $550,000.The current market rate is 8%.The journal entry to record each semiannual interest payment is:
E)No entry is needed,since no interest is paid until the bond is due

Question

Quizplus · Accepted Answer

The journal entry to record each semiannual interest payment on bonds is to debit interest expense and credit cash for the amount of interest paid. In this case, the bonds have a par value of $550,000 with an 8% interest rate, meaning the semiannual interest payment is $22,000 ($550,000 * 0.08 * 0.5). Since the market rate is also 8%, the bonds are being sold at par and there is no premium or discount to be amortized. Therefore, the journal entry to record each semiannual interest payment would be:
Interest Expense   22,000
Cash                     22,000

A Company Issued 8%,15-Year Bonds with a Par Value of $550,000.The