Presented below are three independent situations.
Instructions
a. McEntire Co. sold $2,500,000 of 11%, 10-year bonds at 106.231 to yield 10% on January 1, 2019. The bonds were dated January 1, 2019, and pay interest on July 1 and January 1. Determine the amount of interest expense to be reported on July 1, 2019, and December 31, 2019.
b. Cheriel Inc. issued $600,000 of 9%, 10-year bonds on June 30, 2019, for $562,500. This price provided a yield of 10% on the bonds. Interest is payable semiannually on December 31 and June 30. Determine the amount of interest expense to record if financial statements are issued on October 31, 2019.
c. On October 1, 2019, Chinook Company sold 12% bonds having a maturity value of $800,000 for $853,382 plus accrued interest, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2019, and mature January 1, 2024, with interest payable December 31 of each year. Prepare the journal entries at the date of the bond issuance and for the first interest payment.