Question

Exercise 10-9 On January 1, Crane Company issued S420,000, 896, 20-year bonds at face value. Interest is payable annually on January 1 Prepare journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 LINK TO TEXT VIDEO: APPLIED SKILLS VIDEO: SIMILAR EXERCISE Prepare journal entry to record the accrual of interest on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manally.) Date Account Titles and Explanation Debit Credit Dec. 31 SHOW LIST OF ACCOUNTS LINK TO TEXT VIDEO: APPLIED SKILLS VIDEO: SIMILAR EXERCISE Prepare journal entry to record the payment of interest on January 1. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1

Answer 1

Date	Accounts title and explanation	Debit	Credit
Jan-01	Cash	$ 4,20,000.00
	Bonds payable		$ 4,20,000.00
	(To record issue of bonds)
Dec-31	Interest expense	$      33,600.00
	Interest payable		$      33,600.00
	(To record interest on bonds payable)
Jan-01	Interest payable	$      33,600.00
	Cash		$      33,600.00
	(To record payment of interest on bond)

A liability for interest will be created at the year end since interest belongs to the year ended. This liability will be paid on the first day of Jan as per the Bond contract.