Question

Franklin Company issued $60,000 of 10 -year, 9% bonds payable on January 1, 2024. Franklin Company pays interest each January 1 and July 1 and amortizes discount or premium by the straight-line amortization method. Th company can issue its bonds payable under various conditions. Read the requirements. Requirement Journalize Franklin Company's issuance of the bonds and first semiannual interest payment assuming the bonds were issued at face value. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries.)

Answer 1

In business accounting for bond transactions, the issuance of bonds at face value and first semiannual interest payment are journalized with entries to Cash and Bonds Payable for issuance, and Interest Expense and Cash for the interest payment.

Step-by-step explanation:

The subject of this question is best categorized under Business, and it is targeted towards College level students learning about corporate finance, specifically bond issuance and accounting for bond transactions. Here is how to journalize the issuance of bonds at face value and the first semiannual interest payment:

• Issuance of Bonds:
  Debit: Cash $60,000
  Credit: Bonds Payable $60,000
• First Semiannual Interest Payment:
  Debit: Interest Expense $2,700 (Calculated as $60,000 x 9% x 6/12)
  Credit: Cash $2,700

The first journal entry records the issuance of the bonds, increasing both the cash and bonds payable accounts. The second journal entry reflects the payment of interest for the first six months of the bond's life.