Question

[The following information applies to the questions displayed below.] Schlitterbahn Waterslide Company issued 32,000, 10-year, 5 percent, $100 bonds on January 1 at face value. Interest is payable each December 31. (a) The issuance of these bonds on January 1. (b) The first interest payment on December 31. Indicate the effects of the amounts for the above transactions.

Answer 1

Date	Account Title and Explanation	Debit	Credit
January 01.	Cash	$ 32,00,000
	Bonds payable		$ 32,00,000
	(Issue of bonds )
December 31.	Bond interest expense	$    1,60,000
	Interest payable		$   1,60,000
	(Interest on bond paid )

Issue of bonds created a liability for the company to pay $3200000 in at the end of year 10.

Interest is paid every year equal to 5% of bond's face value.