Question

On March 31, 2020 Forrester Company issued $400,000, 8%, 5 year bonds at face value. Interest is payable on September 30 and March 31 of each year. Prepare the entry for March 31, 2020: Prepare the entry to pay interest on September 30, 2020: Prepare the entry to accrue interest on December 31, 2020:

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Answer 1

Solution 1:

Journal Entries - Forrester Company
Date	Particulars	Debit	Credit
31-Mar-20	Cash Dr	$400,000.00
	To Bonds Payable		$400,000.00
	(To record issue of bond)
30-Sep-20	Interest expense Dr	$16,000.00
	To Cash		$16,000.00
	(To record interest payment)
31-Dec-20	Interest expense Dr	$8,000.00
	To Interest payable		$8,000.00
	(To record interest accrued)

Solution 2:

Journal Entries - Adcock Company
Date	Particulars	Debit	Credit
30-Apr-20	Cash Dr	$618,000.00
	To Bonds Payable		$600,000.00
	To Premium on Bonds Payable		$18,000.00
	(To record issue of bond)
31-Oct-20	Interest expense Dr	$26,550.00
	Premium on bond payable Dr	$450.00
	To Cash		$27,000.00
	(To record interest payment)
31-Dec-20	Interest expense Dr	$8,850.00
	Premium on bond payable Dr	$150.00
	To Interest payable		$9,000.00
	(To record interest accured)