Question

The board of directors of Mailroom Plus authorized the issue of $8,000,000 of 6%, 10-year bonds payable. The semiannual interest dates are May 31 and November 30. The bonds are issued on May 31, 2018, at par. **Requirements** 1. Journalize the following transactions:$ $a. Issuance of half of the bonds on May 31, 2018$ $b. Payment of interest on November 30, 2018$ $c. Accrual of interest on December 31, 2018$ $ d. Payment of interest on May 31, 2019 2. Report interest payable and bonds payable as they would appear on the company’s balance sheet at December 31, 2018.

Answer 1

To journalize the transactions related to the issuance of bonds by Mailroom Plus, the company would record the issuance of half of the bonds, payment of interest, accrual of interest, and payment of interest. At December 31, 2018, the company would report interest payable as a current liability and bonds payable as a long-term liability on its balance sheet.

Step-by-step explanation:

To journalize the transactions related to the issuance of bonds by Mailroom Plus, the following steps should be followed:

Issue of half of the bonds on May 31, 2018: The entry would be:

Bonds Payable 4,000,000
Cash 4,000,000
Payment of interest on November 30, 2018: The entry would be:

Interest Expense 240,000
Cash 240,000
Accrual of interest on December 31, 2018: The entry would be:

Interest Expense 240,000
Interest Payable 240,000
Payment of interest on May 31, 2019: The entry would be:

Interest Expense 240,000
Interest Payable
At December 31, 2018, Interest Payable and Bonds Payable would appear on the company's balance sheet as current liabilities and long-term liabilities respectively.

Interest Payable: Amount of interest owed by the company but not yet paid.
Bonds Payable: Total amount of bonds issued by the company that are outstanding.