A company issued 8%,15-year bonds with a par value of $550,000 that pay interest semiannually.The market rate on the date of issuance was 8%.The journal entry to record each semiannual interest payment is:

A) Debit Bond Interest Expense $22,000; credit Cash $22,000.
B) Debit Bond Interest Expense $44,000; credit Cash $44,000.
C) Debit Bond Interest Payable $22,000; credit Cash $22,000.
D) Debit Bond Interest Expense $550,000; credit Cash $550,000.
E) No entry is needed,since no interest is paid until the bond is due.

Question

Gehan Hasan · Accepted Answer

Final Answer : A, Explanation :  The interest payment is calculated as 8% of the par value ($550,000) annually, which equals $44,000 per year. Since interest is paid semiannually, each payment is half of the annual interest, or $22,000.

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