Question

# On Jan 1, 2023 JAR's board of directors authorized a \$3 million bond issue.   The 3,000,...

 On Jan 1, 2023 JAR's board of directors authorized a \$3 million bond issue. The 3,000, 4%, \$1,000, semiannual, 10 year bonds pay interest every July 1 and January 1. The bonds will be issued to investors as JAR's management sees fit to faciltate increased cash flow as JAR's liquid cash dimished substantially following the acquisition of Diggity Dog. JAR issues \$500,000 of the bonds on April 1, 2023 plus accrued interest at 101. JAR issues \$300,000 of the bonds on Nov 1, 2023 plus accrued interest at 102. Prepare the entries 1 For bond issuance on 4/1/23 2 For interest payment on 7/1/23 3 For bond issuance on 11/1/23 4 For interest accrual 12/31/23. JAR uses straight-line amoritization of all discounts and premiums.

#### Homework Answers

Answer #1

Journal entries

DATE PARTICULARS DEBIT CREDIT

April 1, 2023 cash a/c dr \$500,000

To 4%Bonds A/C \$500,000

(being JAR issues 4% bonds )

july 1, 2023 interest on bonds a/c \$ 5,000

To cash a/c \$5,000

( being interest on bonds paid ) wn .1

nov 1, 2023 cash A/C dr \$300,000

To 4% bonds a/c \$300,000

(being 4% bonds issued)

jan 1, 2024 Interest on bonds A/C dr \$12,000

To cash A/C \$12,000

(being interest on bonds paid semi annualy) WN 2

working note

1,interest on bonds on july 1, 2023

\$500,000*4%*3/12 ( 3 months fromApril 1, 2023 to july 1, 2023)

= \$5,000

2)

interest on bonds on jan 1, 2024

4% bonds \$500,000 for 6 months ( i.e from july 1, 2023 to jan 1, 2024 )

=\$500,000*4%*6/12

=\$10,000

4% bonds \$300,000 for 2months ( i.e from nov 1, 2023 to jan 1, 2024)

\$300,000*4%*2/12

=\$2,000

total interest = \$10,000+ \$2,000

= \$12,000

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