Question

Hardy Corporation had the following bond issue:

Date of issue/sale:	May 1, 20-A
Principal:	$500,000
Sale price of bonds:	100
Life of bonds:	10 years
Stated rate:	6% a year payable semiannually on October 31 and April 30

Instructions: Prepare the following general journal entries.

1. The issuance of the bonds on May 1, 20-A.
2. The first interest payment for 20-A.
3. The adjusting entry for December 31, 20-A.
4. The reversing entry for January 1, 20-B.

If an amount box does not require an entry, leave it blank.

Answer 1

Jourrnal entries are as follows:

Date	Account and Explanation	Debit ($)	Credit($)
May 1	Cash	500,000
	Bond Payable		500,000
	(Recorded the Issuance of Bond )
October 31	Interest Expenses ($500,000 * 6% * 6/12)	15,000
	Cash		15,000
	(Recorded first interest payment )
December 31	Interest Expenses ($500,000 * 6% * 2/12)	5,000
	Interest Payable		5,000
	(Recorded the adjusting entry for Interest )
January 1	Interest Payable	5,000
	Interest Expenses		5,000
	(Recorded the reversing entry for Interest)