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19 April, 13:50

On January 1, 2020, Klosterman Company issued $500,000, 10%, 10-year bonds at face value. Interest is payable annually on January 1. (a) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 (b) Prepare the journal entry to record the accrual of interest on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31 (c) Prepare the journal entry to record the payment of interest on January 1, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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  1. 19 April, 14:13
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    Answer and Explanation:

    Journal entry to record the issuance of the bonds.

    A.

    Jan 1

    Dr cash $500,000

    Cr bonds payable $500,000

    B. Journal entry to record the accrual of the interest

    Dec 31 2020

    Dr Interest expense $25,000

    Cr Interest Payable $25,000

    C. Journal entry to record the payment of interest on January 1, 2021.

    Dr Interest expense $25,000

    Cr Cash $25,0000

    Interest expense $500,000*10%*1/2=$25,000
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