Question

ent PRINTER VERSION BACK NEXT Question 4 On October 1, 2018, Spooner Corporation issued $810,000 of 10-year, 4% bonds at 100. Interest is payable semi-annually on October 1 and April 1. Spooner's year end is December 31 and the company records adjusting entries annually a) Prepare journal entries to record the following: (Round answers to the nearest whole dollar, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) 1. The issue of the bonds on October 1, 2018 2. The accrual of interest on December 31, 2018. 3. The payment of interest on April 1, 2019. Date Account Titles and Explanation Debit Oct. 1, 2018 Dec 31, 2018 Apr 1, 2019 Version 4.24.16 alicy 2000-2020 John Wiley & Sons, Inc. All Rights Reserved. A Division of John Wiley & Sons, Inc.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Oct. 1, 2018	Cash	$810,000
	4% Bonds		$810,000
	( Bonds are issued and cash is received by the corporation )
Dec. 31, 2018	Interest Expense	$8,100
	Accrued Expense		$8,100
	( As interest for the 3 months is accrued which increases the expense and the liability )
Apr. 1, 2019	Interest Expense	$8,100
	Accrued Expense	$8,100
	Cash		$16,200
	( As interest was only accrued for 3 months before, therefore, the interest for the next 3 months is now booked and the total interest for 6 months is paid )

Interest expense for 3 months = 4% of $810,000 * 3 / 12 = $8,100.