Question

On Jan 1st 2020, Tinning Co. sold 100,000 tins. Each tin cost Tinning Co. $0.10 to produce. Tinning Co. received a 3 year bond with the face amount of $10,000 with a stated rate of 5% compounded annually. The market rate for similar bonds is 6%. Tinning Co. prepares financial statements once every year. For partial credit considerations, show the calculations you utilized to derive your answer. Provide the transactional journal entries associated with this transaction on Jan 1st 2020. Provide the transactional journal entries dated December 31st 2020 when the first interest payment is received.

Answer 1

Journal entries :-

Entry on 1st January 2020 :-

Date	Particulars	Debit ($)	Credit ($)
Jan 1, 2020	5%, 3 year bond	10000
	To sales		10000

Entries on 31st December 2020 :-

Date	Particulars	Debit ($)	Credit ($)
Dec 31, 2020	interest receivable	500
	Interest on 5%, 3 year bond (10000 × 5%)		500
Dec 31,2020	cash	500
	To interest receivable		500

These are all the journal entries required to solve the above given question.

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I hope, all the above-mentioned journal entries are useful and helpful to you.

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