Question

Goodwin, Inc issued $2,000,000 of 5%, 20-year bonds. The bonds were issued at par value on January 1. Interest is payable each June 30 and December 31.

(a) Prepare the general journal entry to record the issuance of the bonds on January 1.

Date Account Name Debit Credit

(b) Prepare the general journal entry to record the first interest payment on June 30.

Date Account Name Debit Credit

Answer 1

(a) general journal entry to record the issuance of the bonds on January 1
Date	Account name	Debit	Credit
Jan-01	Cash A/c	20,00,000
	To    Bonds Payable (5%, 20 years) A/c		2000000
	(Being Bonds issued at Par Has been recorded)
(b) the general journal entry to record the first interest payment on June 30.
Date	Account name	Debit	Credit
Jun-30	Interest Expenses A/c **	50,000
	To Cash A/c		50,000
	(Being Interest paid for the 6 months for Bonds payable )
	**Interest for 6 months    =$2000,000 *5%*6/12 =$50,000