Reference no: EM132463330

Bond Issuance

On January 1, Dallas Enterprises issues bonds that have a $2,250,000 par value, mature in 30 years, and pay 8% interest semiannually on June 30 and December 31. The bonds are sold at par.

Par                 $ 2,250,000

Term                       30

Rate                          8%

Question 1. How much interest will Boston pay (in cash) to the bondholders every six months?

Par (maturity) Value Semiannual Rate Semiannual Cash Interest Payment $2,250,000 x 4.00% = $90,000.00

Question 2. Prepare journal entries to record (a) the issuance of bonds on January 1, (b) the first interest payment on June 30, and (c) the second interest payment on December 31. No Date General Journal Debit Credit 1 1-Jan Cash $ 2,250,000 Bonds Payalbe $ 2,250,000 2 30-Jun Interest Expense $ 90,000 Cash $ 90,000 3 31-Dec Interest Expense $ 90,000 Cash $ 90,000

Question 3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 97 and (b) 105. No Date General Journal Debit Credit 1 1-Jan 2 1-Jan