Journaling interest payment for June 30th 2011
On July 1, 2010, a company issued 32,000,000 of 10 year 12% bond at an effective interest rate of 13%, receiving cash of 30,237,139. Interest on the bond is payable semiannually on Dec 31 and June 30th. The fiscal year is the calendar year.
What I need to do is 1. Journalize for entry to record the amount of cash proceeds from the sale of the bonds.
1. solution: cash debit-$30,237,139 discount on bonds payable 1,762,861 debit, 32,000,000 credit.
Next I needed to journal the first semiannual interest payment on Dec 31, 2010 and the amortization of the bond discount, using the straight-line method I got Interest expense $2,008,143 debit, $88,143 for discount bonds payable credit and $1,920,000 cash credit
Now I need to journal the interest payment for June 30, 2011 and the amortization on the bond discount using the straight-line method Do I journal the information that I came up with on Dec 31, 2010 or do I use 19 periods instead of 20 year period (10*2)