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16 March, 21:57

Madrid Company plans to issue 8% bonds with a par value of $4,000,000. The company sells $3,600,000 of the bonds at par on January 1. The remaining $400,000 sells at par on July 1. The bonds pay interest semiannually on June 30 and December 31. 1. Record the entry for the first interest payment on June 30. 2. Record the entry for the July 1 cash sale of bonds.

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  1. 16 March, 22:05
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    The first interest payment:

    Dr interest expense $144,000

    Cr cash $144,000

    The issuance of the remaining bonds"

    Dr cash $400,000

    Cr bonds payable $400,000

    Explanation:

    The first interest paid on the bonds on 30 June is $144,000 ($3,600,000*8%*6/12) which is debited to interest expense account and credited to cash account as outflow of cash from the company.

    The cash received from selling the remaining bonds is par value of $400,000 which is debited to cash account and credited to bonds payable account.
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Home » Business » Madrid Company plans to issue 8% bonds with a par value of $4,000,000. The company sells $3,600,000 of the bonds at par on January 1. The remaining $400,000 sells at par on July 1. The bonds pay interest semiannually on June 30 and December 31. 1.
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