Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / On June 30, 2016, the market interest rate was 7%
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.
| 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) |
