Entries for Issuing Bonds

Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson issued $900,000 of 10-year, 7% bonds on May 1 of the current year at face value, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.

May 1. Issued the bonds for cash at their face amount.

Nov. 1. Paid the interest on the bonds.

Dec. 31. Recorded accrued interest for two months.

Journalize the entries to record the above selected transactions for the current year.

May 1

Nov. 1

Dec. 31

Question

Business

Harley Fitzpatrick

14 June, 11:20

Entries for Issuing Bonds

Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson issued $900,000 of 10-year, 7% bonds on May 1 of the current year at face value, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.

May 1. Issued the bonds for cash at their face amount.

Nov. 1. Paid the interest on the bonds.

Dec. 31. Recorded accrued interest for two months.

Journalize the entries to record the above selected transactions for the current year.

May 1

Nov. 1

Dec. 31

+3

Answers (1)

Know the Answer?

Jaidyn Moody · Answer 1

See journal entries in explanation below.

Explanation:

May 1. Issued the bonds for cash at their face amount

Debit Cash Account $900,000

Credit Bond Account $900,000

Nov 1. Paid the interest on the bonds

Debit Interest on Bond Account $31,500 (900,000 * 7% * 6/12)

Credit Cash Account $31,500

Dec 31. Recorded accrued interest for two months

Debit Interest on Bond Account $10,500 (900,000 * 7% * 2/12)

Credit (Bond Interest) Accrual Account $10,500