Question

On January 1, 2019, Metlock, Inc. issued $554,500, 14%, 10-year bonds at face value. Interest is payable annually on January 1.

(a)

Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1

(b)

Prepare the journal entry to record the accrual of interest on December 31, 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31

(c)

Prepare the journal entry to record the payment of interest on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1

Answer 1

Answer
Date	Account Titles and Explanation	Debit	Credit
01-Jan-19	Cash	$ 5,54,500
	14% Bond payable		$ 5,54,500
	(To record the issuance of the bonds)
31-Dec-19	Interest Exp ($ 5,54,500 * 14%)	$ 77,630
	Interest Payable		$ 77,630
	(To record the accrual of interest at 14% on $ 5,54,500)
01-Jan-20	Interest Payable	$ 77,630
	Cash		$ 77,630
	(To record the payment of interest )
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