On July 1, 2018, Spear Co. issued 2,000 of its 10%, $1,000 bonds at 103 plus...

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On July 1, 2018, Spear Co. issued 2,000 of its 10%, $1,000 bonds at 103 plus...

On July 1, 2018, Spear Co. issued 2,000 of its 10%, $1,000 bonds at 103 plus accrued interest. The bonds are dated April 1, 2018 and mature on April 1, 2028. Interest is payable semiannually on April 1 and October 1.
1. What amount of cash did Spear receive from the bond issuance?
2. What is the amount of accrued interest and how is this treated in the entry?

business accounting

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Answer 1

Answer #1

a) Value of bond =2000×$ 1000=2000000

(2000000×1.03)=2060000

Accrued interest from april

=($2000000×.10×3/12)=50000

Total amount received =2110000

b)journal entry for accrued interest

Accrued interest a/c Dr 50000

To interest received 50000

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Answer 2

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