Question

Brussels Enterprises issues bonds at par dated January 1, 2020, that have a $2,000,000 par value, mature in four years, and pay 9% interest semiannually on June 30 and December 31. 1. Record the entry for the issuance of bonds for cash on January 1. 2. Record the entry for the first semiannual interest payment and the second semiannual interest payment. 3. Record the entry for the maturity of the bonds on December 31, 2023 (assume semiannual interest is already recorded).

Answer 1

1. January 1

Dr Cash $2,000,000

Cr Bonds Payable $2,000,000

2. June 30

Dr Bond Interest Expense $90,000

Cr Cash $90,000

December 31

Dr Bond Interest Expense $90,000

Cr Cash $90,000

3. December 31

Dr Bonds Payable $2,000,000

Cr Cash $2,000,000

Step-by-step explanation:

1. Preparation of the journal entry to Record the issuance of bonds for cash on January 1.

January 1

Dr Cash $2,000,000

Cr Bonds Payable $2,000,000

(To Record the issuance of bonds for cash )

2. Preparation of the journal entries to Record the first semiannual interest payment and the second semiannual interest payment

June 30

Dr Bond Interest Expense $90,000

Cr Cash $90,000

(9%/2*$2,000,000)

(To Record the first semiannual interest payment)

December 31

Dr Bond Interest Expense $90,000

Cr Cash $90,000

(9%/2*$2,000,0000)

(To Record the second semiannual interest payment)

3. Preparation of the journal entry to Record the maturity of the bonds on December 31, 2023

December 31

Dr Bonds Payable $2,000,000

Cr Cash $2,000,000

(To Record bonds maturity )