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Nuestion #2 On January 1, 2016 Ticktoc issued for par $4,000,000 in 20 year interest rate is 10%). Interest to be paid annual
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Answer #1

Solution:

1) Journal entry to record sale of bond

Date General Journal Debit Credit
Jan. 1 Cash $        4,000,000
Bonds Payable $ 4,000,000
(Being bond issued )

2) Journal entry to record interest payment

Date General Journal Debit Credit
Dec. 31 Interest Expense ($ 4,000,000 * 10%) $            400,000
Cash $     400,000
( Being interest expense paid)

3) Journal entry to record the repayment

Date General Journal Debit Credit
Jan. 1 Bonds Payable $        4,000,000
Cash $ 4,000,000
( Being bonds repayment on retirement)
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