Question

North Airlines Company issued $900,000 of 8%, 10- year bonds on January 1, 2017, at face value. Interest is payable annually on January 1.

Prepare the journal entries to record the following events: The issuance of the bonds. The accrual of interest of December 31. The payment of interest on January 1, 2018. The redemption of bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Answer 1

Statement showing Computations
Date	Particulars	Dr Amt	Cr Amt
Jan 01'2017	Cash Dr	900,000.00
	To Bonds Payable		900,000.00
31 Dec 2017	Interest Expense Dr	72,000.00
	To Interest Payable		72,000.00
	(900,000*8%)
Jan 01 '2018	Interest payable dr	72,000.00
	To Cash		72,000.00
Jan 01'2027	Bonds Payable DR	900,000.00
	To Cash		900,000.00