Bonds Payable Journal Entries; Issued at Par Plus Accrued Interest Askew, Inc.,
ID: 2581033 • Letter: B
Question
Bonds Payable Journal Entries; Issued at Par Plus Accrued Interest Askew, Inc., which closes its books on December 31, is authorized to issue $600,000 of nine percent, 20-year bonds dated May 1, with interest payments on November 1 and May 1 Required Prepare journal entries to record the following events, assuming that the bonds were sold at 100 plus accrued interest on October1: a. The bond issuance. b. Payment of the first semiannual period's interest on November 1 C. Accrual of bond interest expense at December 31 d. Payment of the semiannual interest on May 1 of the following year. e. Retirement of $300,000 of the bonds at 101 on May 1, Year 2 (immediately after the interest payment on that date). Round to the nearest dollar. Use 360 days for calculations. General Journal Date Description Debit Credit a. Oct.1 Bonds Payable Issuance of bonds at 100 plus five months' accrued interest. b. Nov.1 Bond Interest Payable To record semiannual interest payment.Explanation / Answer
Date Description Debit Credit 1-Oct Cash $622,500 Bonds Payable $600,000 Bond Interest Payable $22,500 (Issuance of bonds at 100 plus five months' accrued interest) 1-Nov Bond Interest Payable $22,500 Bond Interest Expense $4,500 Cash $27,000 (To record semiannual interest payment) 31-Dec Bond Interest Expense $9,000 Bond Interest Payable $9,000 (To accrue interest expense) 1-May Bond Interest Payable $9,000 Bond Interest Expense $18,000 Cash $27,000 (To record semiannual interest payment) 1-May Bonds Payable $300,000 Loss on redemption of Bonds $3,000 Cash $303,000 (To record retirement of bonds)