Question

Powell Company issued a $1,200,000​, 7 %​, 10​-year bond payable at face value on January​ 1, 2018. Interest is paid semiannually on January 1 and July 1.

Requirements
1. Journalize the issuance of the bond payable on January​ 1, 2018.
2. Journalize the payment of semiannual interest on July​ 1, 2018.

Answer 1

1.Dr Cash 1,200,000

Cr Bonds Payable 1,200,000

2. Dr Interest Expense 42,000

Cr Cash 42,000

Step-by-step explanation:

1. Preparation of the Journal entry to record the issuance of the bond payable on January​ 1, 2018.

Since the company issued the amount of $1,200,000 this means that the transaction will be recorded as:

January 1 2018

Dr Cash 1,200,000

Cr Bonds Payable 1,200,000

( To record Issued bonds at par)

2. Preparation of the Journal entry to record the payment of semiannual interest on July​ 1, 2018.

Since the company issued the amount of $1,200,000​ with 7 %​, and 10​-year bond payable at face value, this means the transaction will be recorded as;

July 1 2018

Dr Interest Expense 42,000

Cr Cash 42,000

($1,200,000 × 0.07 × 6/12)

(To record paid semiannual interest payment)