Question

On July 31, 2021, Crane Inc. issued $490,000 of 5-year, 4% bonds at 104. Interest is payable semi-annually on July 31 and January 31. Crane’s fiscal year end is January 31.

Is the market rate of interest higher or lower than 4%?

The market rate of interest is select an option

2) Record the issue of the bonds on July 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
July 31	enter an account title to record issuance of bonds

3) Record the payment of interest on January 31, 2022, assuming the semi-annual amortization amount for this interest period is $905. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 31	enter an account title to record interest payment on January 31	enter a debit amount	enter a credit amount
	enter an account title to record interest payment on January 31	enter a debit amount	enter a credit amount
	enter an account title to record interest payment on January 31	enter a debit amount	enter a credit amount
	(To record interest payment.)

Answer 1

1
The market rate of interest is lower than 4%
2
Date	Account Titles and Explanation	Debit	Credit
July 31	Cash	509600		=490000*1.04
	Bonds payable		490000
	Premium on Bonds payable		19600
3
Date	Account Titles and Explanation	Debit	Credit
Jan. 31	Interest expense	8895
	Premium on Bonds payable	905
	Cash		9800	=490000*4%*6/12