Question

1. On January 1, 2017, Flounder Company issued $192,000 of 7%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1. 2. On June 1, 2017, Culver Company issued $144,000 of 10%, 10-year bonds dated January 1 at par plus accrued interest. Interest is payable semiannually on July 1 and January 1. For each of these two independent situations, prepare journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance of the bonds. (b) The payment of interest on July 1. (c) The accrual of interest on December 31.

Answer 1

sr. no	Journal	Debit	Credit
PART 1)
a)1/1/2017	cash	$192000
	To bonds payable		$192000
b)7/1/2017	interest expense	$3360
	To cash		$3360
	($192000×7%×3/12)
c) 12/31/2017	interest expense	$3360
	To interest payable		$3360
PART 2)
a)6/1/2017	cash	$150000
	To bonds payable		$144000
	To interest expense		$6000
	($144000×10% × 5/12)
b) 7/1/2017	interest expense	$7200
	To cash		$7200
	(144000×10% ×6/12)
c) 12/31/2017	interest expense	$7200
	To interest payable		$7200