Question

a Corporation issued $600,000, 796, 10-year E10-8 . On August 1, 2014, Orteg Instructions Prepare journal entries to record the following events. bonds r face value. Interest is payable annually on August 1. Ortegas year-end is December 31at (a) The issuance of the bonds. (b) The accrual of interest on December 31, 2014. (c) The payment of interest on August 1, 2015

Answer 1

Date	Accounts title and explanation	Debit	Credit
Aug 1 2014..	Cash	$ 6,00,000.00
	Bonds payable		$ 6,00,000.00
	(To record issue of bonds)
Dec 31 2014..	Interest on bonds	$      17,500.00
	Interest payable		$      17,500.00
	(To record interest on bonds payable)
Aug 1 2015..	Interest payable	$      17,500.00
	Interest on bonds	$      24,500.00
	Cash		$      42,000.00
	(To record payment of interest on bond)

Accrued interest on bonds will be recorded for 5 months starting from august till December.

Working

Date	Accounts title and explanation	Debit	Credit
Aug 1 2014..	Cash	600000
	Bonds payable		=+BJ103
	(To record issue of bonds)
Dec 31 2014..	Interest on bonds	=(600000*7%)/12*5
	Interest payable		=(600000*7%)/12*5
	(To record interest on bonds payable)
Aug 1 2015..	Interest payable	=(600000*7%)/12*5
	Interest on bonds	=(600000*7%)/12*7
	Cash		+17500+24500
	(To record payment of interest on bond)