Question

    RPC Corporation issued $4,000,000 of two-year, 12% bonds at par value on September 30, 2015. The interest is payable semi annually, starting on March 31st, 2015. Prepare the journal entries for the following:

a.      Issuance of the bonds

b.      Interest expense

c.       Retirement of the bonds

Answer 1

Journal entries in the books of RPC corporation:

Date Account lines Debit Credit
30th Sep 2015 Cash/Bank account $4,000,000
To Bonds payable $4,000,000
(Being bonds issued at 12% for two-year)

31st Mar 2016 Interest expense account $240,000
To Cash/Bank account $240,000
(Being semi annual interest of 12%/2 on $4mn)

30th Sep 2016 Interest expense account $240,000
To Cash/Bank account $240,000
(Being semi annual interest of 12%/2 on $4mn)

31st Mar 2017 Interest expense account $240,000
To Cash/Bank account $240,000
(Being semi annual interest of 12%/2 on $4mn)

30th Sep 2017 Interest expense account $240,000
To Cash/Bank account $240,000
(Being semi annual interest of 12%/2 on $4mn)

30th Sep 2017 Bonds payable account $4,000,000
To Cash/Bank account   $4,000,000
(Being retirement of bonds accounted)