Question

a. On January 1, 2019, Rochester Inc. issues a $200,000, 4%, five-year bond at face amount.
The company makes annual interest payments on December 31.
b. Record the first interest payment on December 31, 2019.
c. Record the payment of the principal at maturity.

Answer 1

Date	Accounts title	Debit	Credit
a [jan1 2019]	Cash	$         200,000.00
	Bonds payable		$        200,000.00
	(Bonds issued at par value)
b [31 Dec 2019]	Interest Expense [200000 x 4%]	$             8,000.00
	Cash		$            8,000.00
	(Annual interest paid)
c [1 Jan 2024]	Bonds Payable	$         200,000.00
	Cash		$        200,000.00
	(Bonds repaid after 5 years)