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Esterbrook Hospital Issued $100,000 of 6% 20-year bonds on July 1 20X1, at face value. Interest...

Esterbrook Hospital Issued $100,000 of 6% 20-year bonds on July 1 20X1, at face value. Interest is payable semiannually on January 1 and July 1 of each year, beginning Jan 1 20X2. Assuming that adjustments are made annually on December 31st only, prepare the necessary adjusting entry on December 31st 20X1.

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Answer #1

Par value of bonds = $100,000

Interest rate = 6%

Interest expense on Dec 31, 2001 = Par value of bonds x Interest rate x Time period

= 100,000 x 6% x 6/12

= $3,000

Journal

Date

Account Title and Explanation

Debit

Credit
Dec 31, 2001 Interest expense 3,000
Interest payable 3,000
(To record Interest expense)

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