Question

On 01-01-15, J issued $6,000,000 of its 4%, 7-year term bonds dated 01-01-15. At the time the bonds were issued, similar bonds paid 4.5%. In conjunction with issuing the bonds, on 01-01-15, J incurred and paid $50,000 of issuance costs. The bonds pay interest every July 1 and January 1. J uses the effective-interest method to amortize any bond discount or premium. J prepares AJEs only as of every December 31. Prepare the entries J should make on

a. 01-01-15

b. 07-01-15

c. 12-31-15

d. 01-01-16

Answer 1

given that the On 01-01-15,J issued $6,000,000 of 4%, 7 years term bond

then the bond pay the interest every july 1 and january 1

given that at the time J issued the bonds, similar bonds paid 4.5% upon issuing the bonds ,J incurred and and paid $50000 of bond issuance costs

Date	Particulars	Debit ($)	Credit ($)
01/01/2015	4% Bond	6,000,000
	Cash/ Bank		6,000,000
	(To record bond issue)
07/01/2015	Interest Expense	34,286
	Cash/Bank		34,286
	(To record Inerest paid)
12/31/215	No Entry
01/01/2016	Interest Expense	34,286
	Cash/Bank		34,286
	(To record Interest paid)