On January 1, Boston Enterprises issues bonds that have a $1,450,000 par value, mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par. 1. How much interest will Boston pay (in cash) to the bondholders every six months? 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. 3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 95 and (b) 105.

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

Par value x semi-annual rate= semiannual cash interest.

Semi-annual rate = 9/2 = 4.5%

1,450,000 x 4.5% = 65,250.

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.

Date                          Account Title                             Dr                Cr

Jan 01                       Cash                                      1,450,000

                                     Bonds payable                                       1,450,000

Jun 30                      Bond interest expense             65,250

                                    Cash                                                           65,250

Dec 31                      Bond interest expense             65,250

                                     Cash                                                           65,250

3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 95 and (b) 105.

(a) 95

1,450,000 * 0.95 = 1377500

Discount on bonds = 1,450,000 - 1377500 = 72500

Date                 Account Title                                    Dr                Cr

Jan 01             Cash                                                1377500

                       Discount on bonds payable          72500

                       Bonds payable                                                   1,450,000

(b) 105

1,450,000 * 1.05 = 1522500

Premium on bonds = 1522500- 1,450,000 = 72500

Date                 Account Title                                    Dr                Cr

Jan 01             Cash                                                1522500

                       Premium on bonds payable                                  72500

                       Bonds payable                                                   1,450,000

answer; operating revenues;