Question

E10.12 (LO 3), AP On August 1, 2022, Gonzaga Corporation issued $600,000, 7%, 10-year bonds at face value. Interest is payable annually on August 1. Gonzaga's year-end is December 31. Prepare journal entries for issuance of bonds and payment and accrual of interest. Instructions Prepare journal entries to record the following events. a. The issuance of the bonds. b. The accrual of interest on December 31, 2022. c. The payment of interest on August 1, 2023.

Answer 1

The journal entries for the issuance and payment of bonds with annual interest payments.

Step-by-step explanation:

a. The journal entry to record the issuance of the bonds would be:

Debit: Cash $600,000

Credit: Bonds Payable $600,000

b. To record the accrual of interest on December 31, 2022:

Debit: Interest Expense $42,000

Credit: Interest Payable $42,000

c. To record the payment of interest on August 1, 2023:

Debit: Interest Payable $42,000

Credit: Cash $42,000

Answer 2

Answer:Gongaza journal $

Date.

a. August 1 2022

Bank. Dr. 600,000

Creditors Cr. 600,000

Narration. Issuance of $600,000 of 7 %, 10 years with annual Interest payment.

b. Interest Dr 8400

Creditors Cr 8400

Narration. Accrued interest on bond as at December 31, 2022.

c. August 1 2023

Creditors Dr 420,000

Bank. Cr. 420,000

Narration. Payment of interest on bond as at date.

Step-by-step explanation:

The bond is a way of raising fund from the public and on payment it's received into the bank account and the bond holders are treated as creditors to the company .

The accompanying Interest on the bond account are accrued for monthly, debited to the income statement and credited to the bond account if not pay for immediately or credited to the bank account when payment is made.

The total accrued interest on the bond maturity is credited to bank account and debited to bond account on payment.