Question

11/1/2019	The Piano Co. borrowed funds to replace its damaged roof
		Amount borrowed		180,000
		Interest rate		5%
		Term of note		6 months
INSTRUCTIONS: Prepare the journal entries to record
		the issuance of the note
		the accrual of interest at year end
		the payment of the note on its due date

On January 1, 2019, Teasdale Corp. issued 10 year		800,000	5%	bond payable.
Interest is payable semi-annually on June 30 and December 31.
INSTRUCTIONS: Prepare the journal entry to record the issuance of these bonds assuming they
	were issued at 98.

On December 31, 2019, Rockwell Inc. issues a long term note payable for				400,000
The note is a 10 year note with an interest rate of 8%.
The terms of the note call for semi-annual installment payments of				49,317
INSTRUCTIONS: Prepare the journal entries to record the note on 12-31-17 and to pay the
	first installment payment on 6-30-2018.

Prepare the journal entry for 12-31-18 (second payment)

Answer 1

1	Date	Account titles and explanation					Debit	Credit
	11/1/2019.	Cash					180000
		Note payable						180000
		(Issuance of the note)
	12/31/2019	Interest expense		(180000*5%*2/12)			1500
		Interest payable						1500
		(Accrual of interest at the year end for Nov and Dec
		For 2 months)
	04/30/2020.	Note payable					180000
		Interest expense		(180000*5%*4/12)			3000
		Interest payable					1500
		Cash						184500
		(Payment of the note on it's due date)
2	Issue price=Number of bonds*Issue price
	Let's assume par value=$ 100
	Number of bonds=Total face value/Par value=800000/100=8000
	Issue price=Number of bonds*Issue price=8000*98=$ 784000
	Discount on issue of bonds=Total face value-Issue price=800000-784000=$ 16000
	Date	Account titles and explanation					Debit	Credit
	01/01/2019.	Cash					784000
		Discount on issue of bonds					16000
		Bonds payable						800000
		(Issuance of the bonds)
3	Date	Account titles and explanation					Debit	Credit
	12/31/2017.	Cash					400000
		Note payable						400000
		(Issuance of the note)
	06/30/2018.	Interest expense			(400000*8%*6/12)		16000
		Note payable			(49317-16000)		33317
		Cash						49317
		(First installment payment)
	12/31/2018.	Interest expense		(400000-33317)*8%*6/12			14667
		Note payable			(49317-14667)		34650
		Cash						49317
		(Second installment payment)