Question

The board of directors of LaptopsLaptops Plus authorizes the issue of $ 9,000,000 $9,000,000 of 88​%, 2020​-year bonds payable. The semiannual interest dates are May 31 and November 30. The bonds are issued on May​ 31,2016 at par.

Requirements

1.	Journalize the following​ transactions:
	a. Issuance of half of the bonds on May​ 31, 20162016
	b. Payment of interest on November​ 30, 20162016
	c. Accrual of interest on December​ 31, 20162016
	d. Payment of interest on May​ 31, 20172017
2.	Report interest payable and bonds payable as they would appear on the LaptopsLaptops Plus balance sheet at December​ 31,2016.

Answer 1

Journal entry :

Date	accounts & explanation	debit	credit
May 31,2016	Cash	9000000
	Bonds payable		9000000
Nov 30 2016	Interest expense (9000000*8%*6/12)	360000
	Cash		360000
Dec 31,2016	Interest expense (360000/6)	60000
	Interest payable		60000
May 31,2017	Interest payable	60000
	Interest expense	300000
	Cash		360000

2) Balance sheet presentation :

Current liabilities
Interest payable	60000
Long term liabilities
Bonds payable	9000000