Please Help :) On January 1, 2012, Applied Tech Corporation (ATC) issued $420,00
ID: 2380312 • Letter: P
Question
Please Help :)
On January 1, 2012, Applied Tech Corporation (ATC) issued $420,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 6 percent. When the bonds were issued, the market interest rate was 6 percent. The bonds pay interest once per year on December 31. Requirement 1: Determine the price at which the bonds were issued and the amount that ATC received at issuance. (Omit the "$" sign in your response.) Requirement 2: Prepare the journal entry to record the bond issuance. (Omit the "$" sign in your response.) Requirement 3: Prepare the journal entry to record the interest payment on December 31, 2012, assuming no interest has been accrued earlier in the year. (Omit the "$" sign in your response.)Explanation / Answer
1. Amount received at issuance: $420,000 (when market rate equals stated rate, bonds are issued at face)
2.
Debit: Cash 420,000
Credit: Bonds payable 420,000
3. 420,000*.06 = 25,200
Debit: Interest expense 25,200
Credit: Cash 25,200