Question

Environmental Concerns Limited (ECL) issued $500,000 of 10 year, 6.5% bonds payable at par value on May 1, 2018. The bonds pay interest each April 30 and October 31, and the company ends its accounting year on December 31. Requirements: 1. Fill in the blanks: a. ECL's bonds are priced at b. When ECL's issued its bonds, the market interest rate was 2. Journalize for ECL: a. Issuance of the bonds on May 1, 2018. b. Payment of interest on October 31, 2018. c. Accrual of interest at December 31, 2018. d. Payment of interest on April 30, 2019.

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2

Answer 1

1-
A-	ECL bonds are priced at	Par value
B-	market rate	6.50%
2-
date	explanation	debit	credit
1-May	cash	500000
	bonds payable		500000
31-Oct	interest expense	16250
	cash		16250
31-Dec	interest expense	5416.67
	interest payable		5416.67
30-Apr	interest expense	10833.33
	interest payable	5416.67
	cash		16250
2-
A-	At premium
b-	At discount
2-
date	explanation	debit	credit
1-Mar	cash	294000
	discount on bonds payable	6000
	bonds payable		300000
31-Aug	interest expense	9150
	discount on bonds payable		150
	cash		9000
31-Dec	interest expense	6100
	discount on bonds payable		100
	interest payable		6000
28-Feb	interest expense	3050
	interest payable	6000
	discount on bonds payable		50
	cash		9000