Question

On January 1, 2021, Focus Corporation issued $600,000, 6%, 5-year bonds at face value. Interest is payable annually on January 1. Prepare journal entries to record the (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) (a) Issuance of the bonds. (b) Accrual of interest on December 31. (c) Payment of interest on January 1, 2022.

Answer 1

Dr cash   $600,000

Cr bonds payable       $600,000

Dr interest expense     $ 36,000.00  

Cr interest payable                           $36,000.00  

Description :

The issue of the bonds at face value implies that cash proceeds equal the face value of $600,000 which is then debited to cash account and credited to bonds payable.

The interest due on the bonds on 31st December payable on 1st January 2021 =face value ×coupon rate

face value is $600,000

coupon rate is 6%

interest=$600,000 ×6%=$36,000.00  

Journal entry :

A journal entry is the act of keeping or making records of any transactions either economic or non-economic. Transactions are listed in an accounting journal that shows a company's debit and credit balances. The journal entry can consist of several recordings, each of which is either a debit or a credit.

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