Question

Issuing Bonds at Face Amount

On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $200,000, 6%, 10-year bond that pays semiannual interest of $6,000 ($200,000 × 6% × ½ year), receiving cash of $200,000.

(a)  Journalize the entry to record the issuance of the bonds. If an amount box does not require an entry, leave it blank.

	Cash
	Bonds Payable

(b)  Journalize the entry to record the first interest payment on June 30. If an amount box does not require an entry, leave it blank.

	Interest Expense
	Cash

(c)  Journalize the entry to record the payment of the principal on the maturity date. If an amount box does not require an entry, leave it blank.

	Bonds Payable
	Cash

Answer 1

Date	Accounts and explanation	Debit(in $)	Credit(in $)
a.	Cash	2,00,000
	Bonds Payable		2,00,000
b.	Interest expenses($200,000*6%*6/12)	6,000
	Cash		6,000
c	Bonds Payable	2,00,000
	Cash		2,00,000