Question

On January 1, 2017, Brussels Enterprises issues bonds at par dated January 1, 2017, that have a $3,400,000 par value, mature in 4 years, and pay 9% interest semiannually on June 30 and December 31. 1. Record the entry for the issuance of bonds for cash on January 1, 2017. 2. Record the entry for the first semiannual interest payment on June 30, 2017. 3. Record the entry for the second semiannual interest payment on December 31, 2017. 4. Record the entry for the maturity of the bonds on December 31, 2020 (assume semiannual interest is already recorded).

Answer 1

Answer:

cash 3,400,000 debit

 bonds payable  3,400,000 credit

--to record issuance--

interest expense 153,000 debit

           cash               153,000 credit

--to record first interest payment--

interest expense 153,000 debit

           cash               153,000 credit

--to record second interest payment--

bonds payable   3,400,000 debit

interest expense    153,000 debit

           cash                 3,553,000 credit

--to record last interest payment and maturity --

Explanation:

interest expense for the bonds semianual payment

3,400,000 x 9% x  1 / 2 = 153,000

on maturity will have the interest and principal as cash outlay and we write-off thebonds payable account