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On May 1, 2010, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were...

On May 1, 2010, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2010, and pay interest semiannually on May 1 and November 1.Financial statements are prepared annually on December 31
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Answer #1
2010
May 1 Cash 600,000
Bonds Payable 600,000

Dec. 31 Bond Interest Expense 9,000
Bond Interest Payable
($600,000 X 9% X 2/12) 9,000

Current Liabilities
Bonds Interest Payable $ 9,000

Long-term Liabilities
Bonds Payable, due 2015 $600,000

2011
May 1 Bond Interest Payable 9,000
Bond Interest Expense
($600,000 X 9% X 4/12) 18,000
Cash 27,000
Nov. 1 Bond Interest Expense 27,000
Cash ($600,000 X 9% X 1/2) 27,000

Nov. 1 Bonds Payable 600,000
Loss on Bond Redemption 12,000
Cash ($600,000 X 1.02) 612,000
answered by: niya
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