Question

On January 1, Applied Technologies Corporation (ATC) issued $530,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 10 percent. When the bonds were issued, the market interest rate was 10 percent. The bonds pay interest once per year on December 31.

Required:

1. 1. Determine the price at which the bonds were issued and the amount that ATC received at issuance.
2. 2. & 3. Prepare the required journal entries to record the bond issuance and the first interest payment on December 31 assuming no interest has been accrued earlier in the year.

Answer 1

Part 1
Since the stated interest rate and market interest rate are same hence the Bond is issued at par.
Price pf Bond =$530,000
ATC will receive $530,000 upon issue of Bond
Part 2 & 3
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	Jan-01	Cash	5,30,000
		Bonds Payable		5,30,000
		(to bond issued at par)
	Dec-31	Interest expenses($530,000*10%)	53,000
		Cash		53,000