Superior

Drive-Ins Ltd. borrowed money by issuing

$4,500,000

of

6%

bonds payable at

96.5

on July 1,

2018.

The bonds are 10-year bonds and pay interest each January 1 and July 1.

Requirements

1.	How much cash did Superior receive when it issued the bonds payable? Journalize this transaction.
2.	How much must Superior pay back at maturity? When is the maturity date?
3.	How much cash interest will Superior pay each six months?
4.	How much interest expense will Superior report each six months? Use the straight-line amortization method. Journalize the entries for the accrual of interest and amortization of discount on December 31, 2018, and the payment of interest on January 1, 2019.

1. How much cash did

Superior

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

Superior received $

4,342,500

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	4,342,500
		Discount on Bonds Payable	157,500
		Bonds Payable		4,500,000

Part 3

2. How much must

Superior

pay back at maturity? When is the maturity date?

At maturity, Superior must pay back $

4,500,000

.

Part 4

The maturity date is

July 1, 2028

.

Part 5

3. How much cash interest will

Superior

pay each six months?

Superior will pay interest of $

135,000

each six months.

Part 6

4. How much interest expense will

Superior

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

2018,

and the payment of interest on January 1,

2019.

Superior will report $

4,050

of interest expense each six months.