On June 30, 2016, the market interest rate was 7%. Starship Enterprises issues $500,000 of 8%, 20-year bonds at

Question

On June 30, 2016, the market interest rate was 7%. Starship Enterprises issues $500,000 of 8%, 20-year bonds at 110.625. The bonds pay interest on June 30 and December 31. Starship amortizes bonds by the effective-interest method. 1. Record issuance of the bonds on June 30, 2016, the payment of interest on December 31, 2016, and the semi-annual interest payment on June 30, 2017.

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Journal Entries: Date Account Titles and Explanation Debit Credit June 30, 2016 Cash 553125 Premium on Bonds Payable 53125 Bonds Payable 500000 (To record issuance of Bonds) December 31, 2016 Interest Expenses 19359 Premium on Bonds Payable 641 Cash 20000 (To record interest payment) June 30, 2017 Interest Expenses 19337 Premium on Bonds Payable 663 Cash 20000 (To record interest payment) Journal Entries: Date Account Titles and Explanation Debit Credit June 30, 2016 Cash =500000*110.625% Premium on Bonds Payable =553125-500000 Bonds Payable 500000 (To record issuance of Bonds) December 31, 2016 Interest Expenses =553125*7%*6/12 Premium on Bonds Payable =20000-19359 Cash =500000*8%*6/12 (To record interest payment) June 30, 2017 Interest Expenses =(553125-641)*7%*6/12 Premium on Bonds Payable =20000-19337 Cash =500000*8%*6/12 (To record interest payment)

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On June 30, 2016, the market interest rate was 7%

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Journal Entries:
Date	Account Titles and Explanation	Debit	Credit
June 30, 2016	Cash	553125
	Premium on Bonds Payable		53125
	Bonds Payable		500000
	(To record issuance of Bonds)

December 31, 2016	Interest Expenses	19359
	Premium on Bonds Payable	641
	Cash		20000
	(To record interest payment)

June 30, 2017	Interest Expenses	19337
	Premium on Bonds Payable	663
	Cash		20000
	(To record interest payment)