Question

On March 1, 2018, Stratford Lighting issued 10% bonds, dated March 1, with a face amount of $420,000. The bonds sold for $414,000 and mature on February 28, 2038 (20 years). Interest is paid semiannually on August 31 and February 28. Stratford uses the straight-line method and its fiscal year ends December 31. Required: 1. to 4. Prepare the journal entry to record the issuance of the bonds by Stratford Lighting on March 1, 2018, interest on August 31, 2018, interest on December 31, 2018 and interest on February 28, 2019. (Do not round your intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)]

• Record the issuance of the bond on March 1, 2018.

Note: Enter debits before credits.

	Date General Journal Debit Credit March 01, 2018

• Record the interest on August 31, 2018.

Note: Enter debits before credits.

	Date General Journal Debit Credit August 31, 2018

• Record the accrued interest on December 31, 2018.

Note: Enter debits before credits.

	Date General Journal Debit Credit December 31, 2018

• Record the interest on February 28, 2019.

Note: Enter debits before credits.

	Date General Journal Debit Credit February 28, 2019

Answer 1

Solution :-

No .	Date	Particulars	Debit	Credit
1.	March 01, 2018	Cash	$414,000
		Discount on bonds payable [ $420,000 - $414,000 ]	$6,000
		Bond payable		$420,000
2.	August 31, 2018	Interest expenses [ $42,000 + $150 ]	$42,150
		Discount on bonds payable [ $6,000 / [ 2 * 20 years ] ]		$150
		Cash [ $420,000 * 10% ]		$42,000
3.	December 31, 2018	Interest expenses [ ( 4 / 6 ) * $42,150 ]	$28,100
		Discount on bonds payable [(4 /6)*$150]		$100
		Interest payable [ ( 4 / 6 ) * $42,000 ]		$28,000
4.	February 28, 2019	Interest expenses [ ( 2 / 6 ) * $42,150 ]	$14,050
		Interest payable  [ ( 2 / 6 ) * $42,000 ]	$14,000
		Discount on bonds payable [ (2 / 6)* $150]		$50
		Cash [ $420,000 * 10% ]		$42,000