Question

1) On January 1st, a company issues a $300,000, 10%, five-year bond at 98%. The market interest rate is 12%.

Entry to record the issuance of the bond.

Entry to record annual interest for year 1.

If interest is paid quarterly, the entry to record interest on April 1st

Answer 1

Journal Entries

Date	Particulars	Debit	Credit
1 Jan	Cash A/ c Dr	294,000
	Discount on bond payable A/c Dr	6,000
	To bond payable A/c		300,000
	( Being bond issued at discount)
31 Dec	Bond interest A/c Dr	31,200
	To discount on bond payable A/c ( 6000/5)		1,200
	To Cash A/c (300,000*10%)		30,000
	(Being int due & paid )
1 April	Bond interest A/c Dr	7,800
	To discount on bond payable A/c ( 6000/5)*3/12		300
	To cash A/c (300,000*10%*3/12)		7500
	(Being quarterly int due & paid)