A Company Issued 8%, 15-Year Bonds with a Par Value

Multiple Choice

A company issued 8%, 15-year bonds with a par value of $550,000. The current market rate is 8%. The journal entry to record each semiannual interest payment is:

A) Debit Bond Interest Expense $22,000; credit Cash $22,000.
B) Debit Bond Interest Expense $44,000; credit Cash $44,000.
C) Debit Bond Interest Expense $36,667; credit Cash $36,667.
D) Debit Bond Interest Expense $660,000; credit Cash $660,000.
E) No entry is needed, since no interest is paid until the bond is duE.$550,000 x .08 x 1/2 year = $22,000