Kelvin

Company borrowed money by issuing

$6,000,000

of

7%

bonds payable at

101.9

on July 1,

2018.

The bonds are five-year bonds and pay interest each January 1 and July 1.

Requirements

1.

How much cash did

Kelvin

receive when it issued the bonds payable? Journalize this transaction.

2.

How much must

Kelvin

pay back at maturity? When is the maturity date?

3.

How much cash interest will

Kelvin

pay each six months?

4.

How much interest expense will

Kelvin

report each six months? Use the straight-line amortization method. Journalize the entries for the accrual of interest and the amortization of premium on December 31,

2018,

and payment of interest on January 1,

2019.

1. How much cash did

Kelvin

receive when it issued the bonds payable? Journalize this transaction.

Kelvin received $

6,114,000

when the bonds payable were issued.

Part 2

Journalize the issuance of the bonds payable. (Record debits first, then credits. Exclude explanations from any journal entries.)

Journal Entry
Date		Accounts	Debit	Credit
Jul	1	Cash	6,114,000
		Premium on Bonds Payable		114,000
		Bonds Payable		6,000,000

Part 3

2. How much must

Kelvin

pay back at maturity? When is the maturity date?

At maturity, Kelvin must pay back $

6,000,000

.

Part 4

The maturity date is

July 1, 2023

.

Part 5

3. How much cash interest will

Kelvin

pay each six months?

Kelvin will pay interest of $

each six months.