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26 August, 03:33

Damon Corporation issued $400,000 of 6% bonds on May 1, 2020 using straight-line interest. The bonds were dated January 1, 2020, and mature January 1, 2023, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest.

Prepare Damon's journal entries for (a) the May 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.

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  1. 26 August, 03:44
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    May 1

    Dr Cash408,000

    Cr Bonds Payable 400,000

    Cr Interest Expense 8,000

    July 1

    Dr Interest Expense 12,000

    Cr Cash 12,000

    Dec 31

    Dr Interest Expense 12,000

    Cr Interest Payable12,000

    Explanation:

    May 1,

    Dr Cash408,000

    Cr Bonds Payable 400,000

    Cr Interest Expense 8,000 (Accrued Interest = 400,000 x 6% x 4/12)

    July 1

    Dr Interest Expense 12,000

    Cr Cash 12,000 (Bond interest expense = 400,000 x 6% x 6/12)

    Dec 31

    Dr Interest Expense 12,000

    Cr Interest Payable12,000
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