Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $
ID: 2483324 • Letter: A
Question
Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1,840 million on July 1, 2016, at a price of $1,810 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.
Prepare the journal entry to record interest at the effective interest rate at December 31.
Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $1,840 million on July 1, 2016, at a price of $1,810 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.
Explanation / Answer
Solution-
Date Account Titles & Explanation Debit Credit Dec. 31 Interest expense (10%*$1,810*½) $90.50 Discount on bonds payable $7.70 Cash (9%*$1,840*½) $82.80