On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $1

Question

On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $1,000,000, 6%, 10-year bond that pays semiannual interest of $30,000 ($1,000,000 x 6% x ½ year), receiving cash of $1,000,000.

Journalize the entries to record (a) the issuance of the bonds, (b) the first interest payment on June 30, and (c) the payment of the principal on the maturity date of December 31 on page 11. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTSDesigner Fabric Inc.General Ledger

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

a Cash 1000000       Bonds payable 1000000 b Interest expense 30000        Cash 30000 c Bonds payable 1000000        Cash 1000000

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