Question

On September 1, 2017, Ivanhoe Corporation issued $605,000 of 10-year, 3% bonds at 95. Interest is payable semi-annually on September 1 and March 1. Ivanhoe's fiscal year end is February 28.

 

Record the accrual of interest on February 28, 2018, assuming the semi-annual amortization amount for this interest period is $1,024

Answer 1

Journal Entry to record the accrual of interest on February 28, 2018

Date	Account Titles and Explanation	Debit	Credit
February 28, 2018	Interest Expenses A/c	$10,099
	To Discount on Bond Payable A/c		$1,024
	To Cash A/c		$9,075
	[Entry to record the accrual of interest on February 28, 2018 ]

Bond Discount amortization = $1,024 [ Directly given in the question ]

Cash = $605,000 x 1.50% = $9,075

Therefore, Total Interest Expense for the semi annual period ending February 28, 2018

= $1,024 + 9,075

= $10,099