on January 1, $500,000 of 8%, 10-year bonds were sold for $530,000, the bonds require semiannual interest payments on June 30 and December 31. what is the correct entry for recording the June 30 interest payment on the bonds?

I have 20.00 in interest not sure on how to do the entry for recording.

June 30 

Journal Entry

Dr. Interest expense _$18,500

Dr. Premium on bond $1,500

Cr. Cash _____________ $20,000

Step-by-step explanation

First we need to calaculate the premium on the bond

Premium on bond = $530,000 - $500,000 = $30,000

Interest payment is calculated using following formula

Interest payment = Face value x Coupon payment x 6/12

Interest payment = $500,000 x 8% x 6/12. = $20,000

Now calculate the amortization of bond premium using straight line method

Amortization of premium on bond = Premium on bond / Numbers of periods

Amortization of premium on bond = $30,000 / ( 10 years x 2 ) = $1,500

As premium on bond reduces the interest expense for the period

So interest expense can be calculated as follow

Interest expense = Interest payment - Amortization of premium on bond = $20,000 - $1,500 = $18,500

Pass the journal entry by crediting the cash account by $20,000 as payment is made amortization of bond premium will reduce the interest expense and bond premium account will be debited to reduce the premium on bond balance and debiting the interest expense amount by balance amount of cash payment and amortization of premium on bond.