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On January 1, 2015, Providence, Inc., issues $1,000,000 of 10 percent, 5-year bonds. Providence makes the first semiannual interest payment on June 30, 2015. Complete the necessary journal entry for June 30, 2015 by selecting the account names and dollar amounts from the drop-down menus.

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mltn1980

Answer:

On June 30, 2015      

At the moment of record the first interest payment      

Debit  $50,000  Bond Interest Expense    

Credit  $50,000  Cash    

Explanation:

If the company pays 10% of annual interest it means that the semiannual payment on interest will be $1,000,000 * 0,10 = $100,000 / 2, because it's semiannual payments.

Therefore, the journal entries for these transactions are:

On January 1, 2015    

  • It the moment of the bond issued the company register:    

 Debit  $1,000,000  Cash    

 Credit  $1,000,000  Bonds Payable  

   

On June 30, 2015    

  • At the moment of record the first interest payment      

 Debit  $50,000  Bond Interest Expense  

 Credit  $50,000  Cash