Question

5. Keaubie Co. issued $400,000, 6.75% 15-year bonds payable at a price of 100 (face value), on Jan. 1a.Journalize the issuance of the bonds. Journalize the first annual interest payment and amortization of the discount or premium.c.Journalize the retirement of the bonds at maturity.

Answer 1

Journal entries are as follows:

Date	Account and Explanation	Debit($)	Credit($)
1)	Cash	400,000
	Bond Payable		400,000
	( Recorded the issue of the bond at par)
2)	Interest Expenses ($400,000 * 6.75%)	27,000
	Cash		27,000
	(Recorded the interest payment
3)	Bond Payable	400,000
	Interest Expenses	27,000
	Cash		427,000
	(Recorded the payment of bond and interest