Question

(a) On 1st April 2017, a company issued OMR 100,000, 10 years, 5% bonds at face value. Interest is payable on 1st January and 1st July every year. 31st December is the year end date for the company. Pass journal entries for the issue of bond and interest for the year ending on 31st December, 2017.

Answer 1

Solution:

01-04-2017	Cash A/c	Dr	100000
	5% Bond Payable A/c			100000
	(Being issue of 5% Bonds for a face value of 100000)
01-07-2017	Interest A/c	Dr	1250
	Cash			1250
	(Interest paid for 3 months @ 5%)
31-12-2017	Interest A/c	Dr	2500
	Interest payable A/c			2500
	(Interest payable for 6 months accounted)

Working Note:

1. Calculation of interest

100000 x 5/100 x 3/12 = 1250

100000 x 5/100 x 6/12 = 2500