Question

On January 1, 2021, for $17.8 million, Cenotaph Company purchased 8% bonds, dated January 1, 2021. with a face amount of $19.8 million. For bonds of similar risk and maturity, the market yleld is 10%. Interest is paid semiannually on Dune 30 and December 31 Required: 1. Prepare the journal entry to record interest on June 30, 2021, using the effective interest method. 2. Prepare the journal entry to record interest on December 31, 2021, using the effective interest method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry to record interest on June 30, 2021, using the effective interest method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet Record the entry to interest on June 30, 2021, using the effective interest method. Note: Enter debits before credits. General Journal Debit Credit Date June 30, 2021

Answer 1

Requirement 1:

Date	Account title and Explanation	Debit	Credit
June 30,2021	Interest expense [$17,800,000 x 10% x 6/12]	$890,000
	Discount on bonds payable		$98,000
	Cash [$19,800,000 x 8% x 6/12]		$792,000
	[To record semi-annual interest payment]

Requirement 2:

Date	Account title and Explanation	Debit	Credit
December 31,2021	Interest expense [($17,800,000 + $98,000) x 10% x 6/12]	$894,900
	Discount on bonds payable		$102,900
	Cash [$19,800,000 x 8% x 6/12]		$792,000
	[To record semi-annual interest payment]