On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $3,000,000, 8%, 10-year bond that pays semiannual interest of $120,000 ($3,000,000 X 8% X ½ year), receiving cash of $3,000,000. Journalize the entries to record (a) the issuance of the bonds, (b) the first interest payment on June 30, and (c) the payment of the principal on the maturity date of December 31 on page 11. Refer to the Chart of Accounts for exact wording of account titles.

Question

Alexander Cohen

Business

4 March, 19:10

On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $3,000,000, 8%, 10-year bond that pays semiannual interest of $120,000 ($3,000,000 X 8% X ½ year), receiving cash of $3,000,000. Journalize the entries to record (a) the issuance of the bonds, (b) the first interest payment on June 30, and (c) the payment of the principal on the maturity date of December 31 on page 11. Refer to the Chart of Accounts for exact wording of account titles.

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Fields · Answer 1

cash 3,000,000 debit

bonds payable 3,000,000 credit

--to record issuance of the bonds--

interest expense 120,000 debit

cash 120,000 credit

--to record the payment of interest--

bonds payable 3,000,000 debit

interest expense 120,000 debit

cash 3,120,000 credit

--to record last interest payment and also, maturity of the bonds--

Explanation:

As the company recieve the par value no premium nor discount is recognized at issuance just, the cash proceeds and bonds payable

Then, the entire amount of interst is reocgnize as expense as been issued at par

Last, we write-off the payble and also, declare the interest expense for the last time-period from June 30th to Deember 31th year 10.