Ophelia Inc., a calendar year-end company, issued bonds on 1/1/X1. It uses the effective interest method to amortize bond discounts and premiums.
The following facts are known about these bonds.
Issue Date: 1/1/X1
Face Value: $900,000
Issue Price: $823,000
Face Rate: 4% compounded semi-annually (in other words, 2% every six months)
Market (Effective) Rate: 6% compounded semi-annually (in other words, 3% every six months)
Term: 5 years
Semi-Annual Interest Payment Dates: June 30 and Dec 31
First Interest payment will occur on: June 30, 20X1
Note: Round all calculations to the nearest whole dollar.
Required: Using the above information, prepare the journal entries to record (1) the issuance of the bonds and (2) the first cash interest payment on 6/30/X1. Remember to round all
amounts to the nearest whole dollar. Decimals or cents should not be shown in the numerical response portion of your journal entry
Date Account Name Debit Credit
1/1/X1
6/30/X1