Question

On January 1, Boston Enterprises issues bonds that have a $2,200,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par. 1. How much interest will Boston pay (in cash) to the bondholders every six months

Answer 1

Answer:

$ 99,000.00  

Explanation:

The amount of interest the company pays to bondholders every six months is the face value of the bond *semiannual coupon rate

face value is $2,200,000

semiannual coupon rate=9%*6/2=4.5%

interest paid semiannually=$2,200,000*4.5%=$90,000

The double entries for the interest payment would be a credit to cash account and debit to interest expense