Question

On January 1, the first day of the fiscal year, a company issues a $450,000, 6%, 10-year bond that pays semiannual interest of $13,500 ($450,000 × 6% × ½ year), receiving cash of $450,000. (a) Journalize the entry to record the issuance of the bonds. (b) Journalize the entry to record the first interest payment on June 30. (c) Journalize the entry to record the payment of the principal on the maturity date.

Answer 1

Answer and Explanation:

According to the situation, the journal entries are as follows

a. Cash Dr $450,000

To bond payable $450,000

(Being the issuance of the bond is recorded)

Here we debited the cash as it increased the assets and credited the bond payable as it also increased the liabilities

b. Interest expense Dr $13,500

To cash $13,500

(Being the first interest payment is recorded)

Here we debited the interest expense as it increased the expenses and credited the cash as it decreased the assets

c. Bond payable Dr $450,000

To cash $450,000

(Being the payment of the principal on the maturity date is recorded)

Here we debited the bond payable as it decreased the liabilities and credited the cash as it decreased the assets