Question

E10.17 (LO 3), AP Kale Company issued $350,000 of 8%, 20-year bonds on January 1, 2025, at face value. Interest is payable annually on January 1. Instructions Prepare the journal entries to record the following events. The issuance of the bonds. The accrual of interest on December 31, 2025. The payment of interest on January 1, 2026. The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Answer 1

If AP Kale Company issued $350,000 of 8%, 20-year bonds on January 1, 2025, at face value. Interest is payable annually on January 1. The journal entry is: Debit Cash $350,000, Credit Bonds Payable $350,000.

What is the journal entries?

To record the issuance of the bonds on January 1, 2025:

Debit Cash $350,000

Credit Bonds Payable $350,000

To accrue interest on December 31, 2025:

Debit Interest Expense $28,000

($350,000 x 8%)

Credit: Interest Payable $28,000

To record the payment of interest on January 1, 2026:

Debit Interest Payable $28,000

Credit Cash $28,000

To redeem the bonds at maturity:

Debit Bonds Payable $350,000

Credit Cash $350,000

These records show the bond's issuance, accrual, interest payment, and redemption.