Question

On March 1, 2021, Stratford Lighting issued 12% bonds, dated March 1, with a face amount of $810,000. The bonds sold for $795,000 and mature on February 28, 2041 (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 entries to record the issuance of the bonds by Stratford Lighting on March 1, 2021, interest on August 31, 2021, accrued interest on December 31, 2021 and interest on February 28, 2022. (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.)

Answer 1

Journal entry

Date	account and explanation	Debit	Credit
Mar 1	cash	795000
	Discount on bonds payable	15000
	Bonds payable		810000
Aug 31	Interest expense	48975
	Discount on bonds payable (15000/40)		375
	Cash (810000*12%*6/12)		48600
Dec 31	Interest expense	32650
	Discount on bonds payable (375*4/6)		250
	Interest payable		32400
Feb 28	Interest expense	16325
	Interest payable	32400
	Discount on bonds payable		125
	Cash		48600