Question

Sim Corporation sold $400,000 of 12 percent, 10-year bonds at face value on September 1, 2014. The issue date of the bonds was May 1, 2014. 1. Prepare the journal entries to record the sale of the bonds on September 1 and the first semiannual interest payment on November 1, 2014. 2. The company’s fiscal year ends on December 31, and this is its only bond issue. What is the bond interest expense for the year ended December 31, 2014?

Answer 1

Journal Entries
Date	Account Title and explanation	Debit	Credit
Sept 01, 2014	Cash	$               4,16,000
	To Bonds Payable		$                 4,16,000
	To Interest Payable ($ 400,000 X 12% X 4/12)		$                     16,000
November, 01 2014	Interest Payable	$                  16,000
	Interest Expenses ($ 400,000 X 12% )X 2/12	$                     8,000
	To Cash		$                     24,000
	Interest Expenses ($ 400,000 X 12% )X 2/12	$                     8,000
December , 31 2014	To Interest Payable		$                       8,000
	Total Interest Expenses of the year 2014:
	Interest expenses as on Nov, 01 2014	$                     8,000
	Interest expenses as on Dec, 31 2014	$                     8,000
	Total Interest Expenses of the year	$                  16,000