Problem
On July 1, 2017 Alpha Company sells $1,600,000 face value of 12% five year bonds which call for semiannual interest payments. The bonds are dated May 1, 2017 so these bonds are issued between interest dates. The market rate at the date of issue is also 12%. For simplicity, use a 360-day year and 30 day months for all calculations.
Record the journal entries for the issuance of the bonds.
Record the journal entries for the first interest payment due on October 1, 2017. Assume that interest has not been accrued at each month end.