On January 1, the first day of the fiscal year, a company issues a $2,000,000, 5

Question

On January 1, the first day of the fiscal year, a company issues a $2,000,000, 5%, five-year bond that pays semiannual interest of $50,000 ($2,000,000 x 5% x ½), receiving cash of $2,102,260.

Journalize the bond issuance. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTSGeneral Ledger

Journalize the bond issuance. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

1

2

3

ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 191 Land 194 Office Equipment 195 Accumulated Depreciation-Office Equipment

Explanation / Answer

Date Description Post Ref. Debit Credit 1 Jan-01 Cash 110 $ 21,02,260 2 Jan-01 Bonds payable 251 $ 20,00,000 3 Jan-01 Premium on bonds payable 253 $     1,02,260 Workings: Premium on bonds payable = Issue price - Face Value = $21,02,260 - $20,00,000 $     1,02,260

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