Question

On May 1, 2020, Crane Corp. issued $560,000, 12%, 5-year bonds at face value. The bonds were dated May 1, 2020, and pay interest annually on May 1. Financial statements are prepared annually on December 31. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation May 1, 2020 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare the adjusting entry to record the accrual of interest on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to o decimal places, e.g. 5,675.) Debit Credit Date Account Titles and Explanation Dec. 31, 2020

Answer 1

a) Journal entry

Date	account and explanation	Debit	Credit
May 1,2020	Cash	560000
	Bonds payable		560000

b) Adjusting entry

Date	account and explanation	Debit	Credit
Dec 31,2020	Interest expense (560000*12%*8/12)	44800
	Interest payable		44800

c) balance sheet (partial)

As on December 31,2020

Current liabilities
Interest expense	44800
Long term liabilities
Bonds payable	560000

d) Journal entry

Date	account and explanation	Debit	Credit
May 1,2021	Interest payable	44800
	Interest expense	22400
	Cash		67200

e) Adjusting entry

Date	account and explanation	Debit	Credit
Dec 31,2021	Interest expense	44800
	Interest payable		44800

f) Journal entry

Date	account and explanation	Debit	credit
Jan 1,2022	Interest payable	44800
	Cash		44800
	(To record payment of interest)
Jan 1,2022	Bonds payable	560000
	Loss on redemption	22400
	Cash (560000*1.04)		582400
	(To record redemption of the bonds)