Question

On March 1, 2021, Stratford Lighting issued 10% bonds, dated March 1, with a face amount of $870,000. The bonds sold for $855,000 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.) View transaction list Journal entry worksheet < 1 2 3 4 > Record the issuance of the bond on March 1, 2021. Note: Enter debits before credits. Date General Journal Debit Credit March 01, 2021

Answer 1

Answer
Journal entry
Date	Account Titles and Explanations	Debit	Credit
Mar-01	Cash	$     8,55,000
	Discount on bonds payable	$        15,000
	To, Bonds payable		$     8,70,000
	(To record issuance of bond)
Aug-31	Interest expense	$        43,875
	To, Discount on bonds payable ($15000/40)		$             375
	To, Cash ($870000*10%*6/12)		$        43,500
	(To record semi-annual interest paid)
Dec-31	Interest expense	$        29,250
	To, Discount on bonds payable ($375*4/6)		$             250
	To, Interest payable ($870000*10%*4/12)		$        29,000
	(To record accreud interest of 4 months )
Feb-28	Interest expense	$        14,625
	Interest payable	$        29,000
	To, Discount on bonds payable		$             125
	To, Cash		$        43,500
	(To record semi-annual interest paid)