Bond Interest on Bonds Issued at Face Value
On March 31, 2011 , Gardner Corporation received authorization to issue $50,000 of 9 percent,3D-year bonds payable. The bonds pay interest on March 31 and September 30. The entire issue was dated March 31, 2011, but the bonds were not issued until April 30,2011. They were issued at value.
a. Prepare the journal entry at April 30, 2011, to record the sale ofthe bonds.
b. Prepare the journal entry at September 30, 2011, to record the semiannual bond interest]payment.
c. Prepare the adjusting entry at December 31,2011, to record bond interest expense accruedsince September 30, 2011. (Assume that no monthly adjusting entries to accrue interest expense had been made prior to December 31,2011.)
d. Explain why the issuing corporation charged its bond investors for interest accrued in April 2011, prior totheissuance date (see part b above).
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