Answer:
Journal entries for the issue of bond:
Dr Cash $340,000
Cr Bonds payable $340,000
Being issue of bonds to investors
Interest payment on 30 June,2021
Dr Interest expense $15,300
Cr Cash $15,300
Being payment of interest on bond
Interest payment on 31 December,2021
Dr Interest expense $15,300
Cr Cash $15,300
Being payment of interest on bond
Explanation:
The bond issue brings a cash inflow of $340,000, an increase in cash which should debited to cash and credited to bonds payable account confirming that an amount of $340,000 is owed to the bondholders.
Assuming the market interest rate of 9% is the same as the coupon interest rate,the semi-annual interest is calculated thus:
9%*$340,000*6/12=$ 15,300.00
The interest is for six months hence the need to prorate the interest.
