Question

Devers Corporation issued $400,000 of 6% bonds on May 1, 2017. The bonds were dated January 1, 2017, and mature January 1, 2020, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Devers’s journal entries for (a) the May 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.

Answer 1

Answer
Interest expense for four months Jan to April
(400000×6%×4)/12
$8,000
Journal Entry
Date	general journal	debit	credit
05/01/2020	cash	$408,000
	Bonds payable		$ 400,000
	Interest expense		$      8,000
07/01/2020	interest expense	$ 12,000
	Cash		$    12,000
	(400000×6%×6)/12
12/31/2020	interest expense	$ 12,000
	Interest payable		$    12,000