AccountingConfused
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Spring Water Company Ltd. needed to raise $5.6 million of additional capital to finance the expansion of its bottled water company. After consulting an investment banker and the company's VP Finance, it decided to issue bonds. The bonds had a maturity value of $5.6 million and an annual interest rate of 8%, paid interest semi-annually on June 30 and December 31, and matured on December 31, 2017. The bonds were issued on January 1, 2008, for $5,235,778, which represented a yield of 9%.
Calculate the interest expense for the first year and show the journal entries to record the interest expense and the corresponding interest payments.
1) Total interest expense for year 1: $ __________
June 30
DR Interest expense ___________
CR Cash _________
CR Discount on bonds payable _________
Dec. 31
DR Interest expense __________
CR Cash _________
CR Discount on bonds payable _________
2) Show the journal entry to record the issuance of the bonds.
DR Cash _____________
DR Discount on bonds payable _____________
CR Bond payable ___________
Calculate the interest expense for the first year and show the journal entries to record the interest expense and the corresponding interest payments.
1) Total interest expense for year 1: $ __________
June 30
DR Interest expense ___________
CR Cash _________
CR Discount on bonds payable _________
Dec. 31
DR Interest expense __________
CR Cash _________
CR Discount on bonds payable _________
2) Show the journal entry to record the issuance of the bonds.
DR Cash _____________
DR Discount on bonds payable _____________
CR Bond payable ___________