Question

On February 1, 2021, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $780,000. The bonds sold for $713,083 and mature on January 31, 2041 (20 years). The market yield for bonds of similar risk and maturity was 10%. Interest is paid semiannually on July 31 and January 31. Strauss-Lombardi’s fiscal year ends December 31. Required: 1. to 4. Prepare the journal entries to record their issuance by Strauss-Lombardi on February 1, 2021, interest on July 31, 2021 (at the effective rate), adjusting entry to accrue interest on December 31, 2021 and interest on January 31, 2022.

intermediate calculations and round your final answers to nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete. No Date General Journal Debit Credit 1 February 01, 2021 Cash Discount on bonds payable Bonds payable July 31, 2021 Interest expense Discount on bonds payable Cash 3 December 31, 202 Interest expense Discount on bonds payable Interest payable January 31, 2022 Interest expense Interest payable Discount on bonds payable Cash

Answer 1

Answer:-

No.	Date	General Ledger	Debit	Credit
1	February 01,2020	Cash	713,083
		Discount on bonds payable(780,000-713,083)	66,917
		Bonds Payable		780,000
2	July 31st ,2021	Interest expense(713,083 *5% )	35,654
		Discount on bonds payable(35,100-35-654)		554
		Cash(780,000*4.5%)		35,100
3	December 31st ,2021	Interest expense(713,083+554)*5%*5/6	29,735
		Discount on bonds payable(difference)		485
		Interest Payable(780,000*4.5%*5/6)		29,250
4	January 31,2022	Interest expense(713,083+554)*5%*1/6	5,947
		Interest Payable	29,250
		Discount on bonds payable(difference)		97
		Cash(780,000*4.5%)		35,100
		Note: - Interest paid semiannually on july 31 & Jan 31 so 10/2 = 5%per semi annually
		9 % semiannually so 9/2 =4.5 per semiannually