On January 1, the first day of the fiscal year, a company issues a $5,000,000, 6%, 10-year bond that pays semiannual interest of $150,000 ($5,000,000 x 6% x ½ year), receiving cash of $5,000,000. 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. Refer to the Chart of Accounts for exact wording of account titles.

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Business

Aliya Ritter

29 July, 19:48

On January 1, the first day of the fiscal year, a company issues a $5,000,000, 6%, 10-year bond that pays semiannual interest of $150,000 ($5,000,000 x 6% x ½ year), receiving cash of $5,000,000. 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. Refer to the Chart of Accounts for exact wording of account titles.

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Jaqueline Case · Answer 1

The journal entries are shown below:

On Jan 1 - Cash A/c Dr $5,000,000

To Bonds Payable A/c $5,000,000,

(Being bond is issued)

On June 30 - Interest expense A/c Dr $150,000

To Cash A/c $150,000

(Being interest paid for cash)

On December 31, Bonds Payable A/c Dr $5,000,000

To Cash A/c $5,000,000

(Being payment of principal is recorded on the maturity date)