Question

HiLi Corporation had the following bond issue:

Date of issue/sale:	May 1, 20-A
Principal:	$500,000
Sale price of bonds:	100
Life of bonds:	10 years
Stated rate:	6% a year payable semiannually on October 31 and April 30

Required:

Prepare the following general journal entries.

a. The issuance of the bonds on May 1, 20-A.

b. The first interest payment for 20-A.

c. The adjusting entry for December 31, 20-A.

d. The reversing entry for January 1, 20-B.

If an amount box does not require an entry, leave it blank.

Page: 1

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	a. May 1					1
2						2
3						3
4	b. Oct. 31					4
5						5
6						6
7	c. Dec. 31					7
8						8
9						9
10	d. Jan. 1					10
11						11

Answer 1

Journal Entries
Date	Particulars		Debit	Credit
May-01	Cash			$ 5,00,000.00
	To Bonds Payable			$ 5,00,000.00
Oct-31	Interest Expense		$    15,000.00
	To Cash				$    15,000.00
	($ 500000 x 6% x 6/12)
Dec-31	Interest Expense		$    15,000.00
	To Interest Payable			$    15,000.00
	($ 500000 x 6% x 6/12)
Jan-01	Interest Payable		$    15,000.00
	To Interest Expense			$    15,000.00