Homework Answers
part a and b:
part entries in the books of the issuer:
april,1,2012
cash dr. 29600000
interest expenses dr. 300000
discount on issue of bonds dr. 400000
bonds Cr. 30000000
interest payble Cr. 300000
(bonds issuied)
first interest payment on Aug,31,2012
interest payable Dr 300000
interest Dr 1500000 ( 6 month interest 30000000*.12 -300000)
cash Cr 1800000
(being interest paid )
interest on Feb,28,2013 and onwards till Feb,28,2015
interest Dr 1800000
Cash Cr 1800000
( being interest paid)
bond Dr 30000000
Cash Cr 30000000
( being bonds repaid on maturity)
journal entries in the books of bond buyer:
investment in bond Dr 29600 ( as the investments are recorded at fair value )
interest receivable Dr 300
cash Cr 29600
interest income Cr 300
( being bond purchased)
first interest receipt on Aug,31,2012
cash Dr 1800
interest receivable Cr 300
interest income Cr 1500
( being interest received )
entries to record interest on Feb,28,2013 and onwards till Feb,28,2015
cash Dr 1800
interest Income Cr 1800
( being interest received )
on feb,28,2015
cash Dr 30000
investment Cr 29600
profit on the sale of investment Cr 400
( being investment matured )
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