Question

On June? 30, Prince Company issues 12 %?, five?-year bonds payable with at face value of $ 140 comma 000. The bonds are issued at face value and pay interest on June 30 and December 31. Requirements 1. Journalize the issuance of the bonds on June 30. 2. Journalize the semiannual interest payment on December 31. Requirement 1. Journalize the issuance of the bonds on June 30. ?(Record debits? first, then credits. Select explanations on the last line of the journal? entry.) Date Accounts and Explanation Debit Credit Jun. 30 Requirement 2. Journalize the semiannual interest payment on December 31. ?(Record debits? first, then credits. Select explanations on the last line of the journal? entry.) Date Accounts and Explanation Debit Credit Dec. 31

Answer 1

1. The journal entry for issue of bonds would be:

Cash Dr $140000

To 12% Bonds Payable $140000

(Being 12% bonds payable issued at par)

2. Semi annual interest = $140000*12%/2 = $8400

The journal entry for semi annual interest would be:

Interest Expense Dr $8400

To interest Payable $8400

To record payment of interest entry would be:

Interest Payable Dr $140000

To Cash $140000

Alternately, instead of interest payable account, cash account can also be credit to show payment of interest. Then only one entry would be required on December 31.