Question

brussels enterprises issues bonds at par dated january 1, 2021, that have a $2,700,000 par value, mature in four years, and pay 6% interest semiannually on june 30 and december 31. 1. record the entry for the issuance of bonds for cash on january 1. 2. record the entry for the first semiannual interest payment and the second semiannual interest payment. 3. record the entry for the maturity of the bonds on december 31, 2024 (assume semiannual interest is already recorded).

Answer 1

The journal entry for the issuance of bonds for cash on January 1 is: Debit Cash $2,700,000, Credit Bonds payable $2,700,000.

Journal entry

1. January 1

Debit Cash $2,700,000

Credit Bonds payable $2,700,000

(To record  issuance of bonds for cash)

2. June 30

Debit bond  Interest expense $81,000

Credit Cash $81,000

($2,700,000×6%/2)

(To record  first semiannual interest payment)

December 31

Debit bond  Interest expense $81,000

Credit Cash $81,000

($2,700,000×6%/2)

(To record second semiannual interest payment)

3. December 31, 2021

Debit Bonds payable $2,700,000

Credit Cash $2,700,000

(To record  payment of bonds payable)

Therefore the journal entry for the issuance of bonds for cash on January 1 is: Debit Cash $2,700,000, Credit Bonds payable $2,700,000.

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