Question

On January 1, 2020, Maris Enterprises issued 9%, 5-year bonds with a face amount of $800,000 at par. Interest is payable annually on January 1.

Answer 1

Answer:

A. Jan 1

Dr cash $800,000

Cr Bonds payable $800,000

B. Dr Interest expense $72,000

Cr Interest Payable $72,000

Step-by-step explanation:

Preparation of the entries to record the issuance of the bonds and the first annual interest accrual on December 31

A. Preparation of the entries to record the issuance of the bonds

Jan 1

Dr cash $800,000

Cr Bonds payable $800,000

(Being to record issuance of the bonds)

B. Preparation of the Journal entry to record first annual interest accrual on December 31

Dec 31

Dr Interest expense $72,000

Cr Interest Payable $72,000

($800,000*9%)

(Being to record the first year interest expense accrued)