Question

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

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

Homework Answers

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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