Question

Prepare journal entries to record the following transactions related to long-term bonds of Brooks Inc. (Show Calculations!) a) On April 1, 2020, Brooks issued $2,000,000, 9% bonds when the market rate was 9%. Interest is payable semi-annually on October 1 and April 1, and the bonds mature on April 1, 2030. b) On October 1, 2020, Brooks Inc. paid the interest due. c) On December 31, 2020, Brooks Inc. accrued interest. d) On April 1, 2021, Brooks Inc. paid the accrued and paid interest.

Answer 1

Credit Workings Debit $ 2,000,000 Date Account Titles and Explanation 01-04-2020 Cash Bonds Payable (To record issue of bonds) $ 2,000,000 $ 90,000 ($ 2,000,000 * 9%) / 12 Months * 6 Months 01-10-2020 Interest Expense Cash (To record interest payment for 6 Months) $ 90,000 $ 45,000 ($ 2,000,000 * 9%) /12 Months * 3 Months 31-12-2020 Interest Expense Interest Payable (To record accrued interest for 3 Months) $ 45,000 $ $ 45,000 45,000 01-04-2021 Interest Expense Interest Payable Cash (To record payment of interest) ($ 2,000,000 * 9%) /12 Months * 3 Months ($ 2,000,000 * 9%) /12 Months * 3 Months $ 90,000