 In this presentation, we will record the journal entry related to the interest payment on bonds. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Information will be on the left. We will record that in the general journal and then post that to our worksheet here. The trial balance is in order assets liabilities equity income and expenses assets in green liabilities orange equity light blue revenue and expenses income and expenses income statement accounts dark blue debits non bracketed or positive for Excel credits bracketed or negative for Excel debits equaling the credits indicated by the green zero and we have revenue here of revenue minus expenses 700,000 at this time. The bonds went on the books for 240,000 face amount equaling the issue price. So it's on the books for the 240,000. In other words, there's no discount and no premium. So we don't have to worry about those at this time. That's nice. We're going to pay interest out at a rate of 8%. Note that the market rate is also 8% here because it was issued at that's when we When it was issued, it was 8% and that that's why there's no discount or premium. So when we calculate the interest though, you always want to think about the cash that's going to be paid being calculated as the interest rate on the bond. This is the amount actually on the bond. The 8% on the bond is what we want to use when we think about what we're actually going to pay because that's what the contract is. So we're going to do this every six months, we're going to have to like jump forward in time when we think about bonds because we have to jump to the relevant time periods when we pay the interest. So the relevant time periods with bonds is one when we issue then the interest payments being six months out now. So at 6.30, we're going to make our first interest payment. We're going to pay cash. So it's not like a mortgage payment here in that we pay some principal in some interest. It's all interest. We pay all the principal at the end. So we're going to say is cash affected? Yeah. So we're going down we're paying interest cash is a debit balance. We're going to make it go down doing the opposite thing to it credit. So I'm going to right click and copy cash. I'm going to put that on the bottom on the credit side in C4 right click and paste 123. Then we'll indent home tab alignment increase indenting is probably done for you already. And then we have to calculate the amount of interest. So the amount we're going to pay is the face amount 240 times the rate 8% 0.08 if we move the decimal over. But that's going to be for a year and it's semi annual. So we're going to divide that by 2 9600. You could think of that a few different ways. We could also think of it as 240,000 times 0.08 19 to a year divided by 12 months would be a monthly total times 6 months have passed or you can think about it as taking the rate 0.08 for a year divided by 2 monthly rate of 4% for 6 I mean not monthly every six month half year rate for 4% times 240,000. So either of those can be useful depending on what we're doing. So we are in the credit side. So I'm going to put a negative then to flip the sign 240,000 times 0.08 divided by 2. So same calculation that should give us a credit or negative 9600 you could type it in there but I would use formulas whenever possible. The debit then is just going to be a positive 9600 we'll do that with a little formula by saying negative of that number enter and then the amounts going to be the amounts going to be the interest expense on the bond. So that's going to be an expense and we already know we're going to debit it because we credited cash. It's also an expense. Expenses only go up in the debit direction bringing down that income. So I'm going to right click and copy put that in C3 right click and paste 123. There's our journal entry we don't have to deal with any premium or discount which is nice. So we're going to post this out we're going to go to interest expense here it is on our worksheet. We're in the middle column in I12 where we say equals point to the 9600 bringing the zero balance up by 9600 to 9600 we're out of balance by 9600 net income goes down revenue minus expenses net income went down. So now we're going to go to the cash here's cash we're in the middle column I3 where we say equals point to the 9600 bringing the balance down from 960,000 minus 9600 to 950,400.