Question

5. On January 1, 2017, British Software Ltd. issued $450,000 of 20-year, 8% bonds that pay interest semiannually on June 30 and December 31. The bonds were sold to investors at their par value.
   
   a. How much interest will British pay to the holders of these bonds every six months?

Amount of interest

b. Prepare the journal entries that British would make to record: (1) the issuance of the bonds on January 1, 2017; (2) the first interest payment on June 30, 2017; and (3) the second interest payment on December 31, 2017.

No	Date	General Journal	Debit	Credit
1	January 01, 2017
2	June 30, 2017
3	December 31, 2017

Answer 1

5. a. How much interest will British pay to the holders of these bonds every six months?

	Amount of interest 450000*8%*6/12 = 18000

b. Prepare the journal entries that British would make to record: (1) the issuance of the bonds on January 1, 2017; (2) the first interest payment on June 30, 2017; and (3) the second interest payment on December 31, 2017.

No	Date	General Journal	Debit	Credit
1	January 01, 2017	Cash	450000
		Bonds payable		450000
2	June 30, 2017	Interest expense	18000
		Cash		18000
3	December 31, 2017	Interest expense	18000
		Cash		18000