On January 1, Year 1, Bell Corp. issued $340,000 of 10-year, 8 percent bonds at their face amount. Interest is payable on December 31 of each year with the first payment due December 31, Year 1. Required Prepare all the general journal entries related to these bonds for Year 1 and Year 2.

Answer and Explanation:

The journal entries are shown below:

On Jan 1

Cash $340,000

Bonds payable $340,00

(Being the bond payable is issued for cash)

For recording this we debited the cash as it increased the assets and credited the bond payable as it also increased the liabilities

On Dec 31

Interest expense ($340,000 * 8%) $27,200

To Cash $27,200

(Being the interest expense for year 1 is recorded)

For recording this we debited the interest expense as it increased the expenses and credited the cash as it decreased the assets

On Dec 31

Interest expense ($340,000 * 8%) $27,200

To Cash $27,200

(Being the interest expense for year 1 is recorded)

For recording this we debited the interest expense as it increased the expenses and credited the cash as it decreased the assets