A company issued 8%, 15-year bonds with a par value of $580,000 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 $23,200; credit Cash $23,200.
B. Debit Bond Interest Expense $46,400; credit Cash $46,400.
C. Debit Bond Interest Payable $38,667; credit Cash $38,667.
D. Debit Bond Interest Expense $530,000; credit Cash $530,000.
E. No entry is needed, since no interest is paid until the bond is due.

Debit Bond Interest Expense $23,200; credit Cash $23,200.

Explanation:

With regards to the above, we should note that due to the fact that the bonds are issued at par, no discount will be involved for this particular bond. Therefore, the interest expense will be calculated as:

= (580,000 × 8% × 15) / 2

= (580,000 × 0.08 × 15)/2

= 348,000

Then, each semiannual interest payment will be:

= $348,000 / 15

= $23200

Therefore, journal entry to record each semiannual interest payment is:

Debit Bond Interest Expense $23,200;

Credit Cash $23,200.

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