HOW DO YOU PREPARE A JOURNAL ENTRY TO RECORD A BOND ISSUANCE?
On January 1, 2013, ATC issued $ 500,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 10%. When the bonds were issued, the market interest rate was 10%. The bonds pay interest once per year on December 31.
Required:
1. Determine the price at which the bonds were issued and the amount that ATC received at issuance.
2. Prepare the journal entry to record the bond issuance.
3. Prepare the journal entry to record the interest payment on December 21, 2013, assuming no interest has been accrued earlier in the year.
Bond best answer:
Answer by Sandy
1. Determine the price at which the bonds were issued and the amount that ATC received at issuance.
The price will be issued at face or par value of $ 500,000as the stated interest rate is the same as the market interest rate, i.e. 10%.
2. Prepare the journal entry to record the bond issuance.
Dr Cash $ 500,000
Cr Bonds payable $ 500,000
3. Prepare the journal entry to record the interest payment on December 31, 2013, assuming no interest has been accrued earlier in the year.
Dr Interest expense $ 50,000
Cr Cash $ 50,000 ($ 500,000 x 10%)
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the front entrance of the renovated bond store on hickson rd
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