Exercise 10-1 Recording bond issuance and interest LO P1

On January 1, 2017, Boston Enterprises issues bonds that have a $1,750,000 par value, mature in 20 years, and pay 10% interest semiannually on June 30 and December 31. The bonds are sold at par.

1. How much interest will Boston pay (in cash) to the bondholders every six months?

2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2017; (b) the first interest payment on June 30, 2017; and (c) the second interest payment on December 31, 2017.

3. Prepare the journal entry for issuance assuming the bonds are issued at (a) 97 and (b) 103.