Question

QS 10-16 Issuing bonds at par LO P1 Madrid Company plans to issue 12% bonds on January 1, 2017, with a par value of $5,000,000. The company sells $4,500,000 of the bonds at par on January 1, 2017. The remaining $500,000 sells at par on July 1, 2017. The bonds pay interest semiannually as of June 30 and December 31.

1. Record the entry for the first interest payment on June 30, 2017.

  
2. Record the entry for the July 1 cash sale of bonds.

Answer 1

SOLUTION:1
Journal Entries
Date	Account Title and explanation	Debit	Credit
June 30, 2017	Interest Expenses	$               2,70,000
	Cash		$                 2,70,000
	(To record the interest expenses of June 30)
SOLUTION:2
Journal Entries
Date	Account Title and explanation	Debit	Credit
July 01, 2017	Cash	$               5,00,000
	Bonds Payable		$                 5,00,000
	(To record the issue of bond)
Working Nots:
	Calcuation of interest payable on June 30, 2017
	Oustanding of Bond as on June 30 , 2017	$            45,00,000
	Interest @ 12% For 6 Month = ($ 4,500,000 X 12% X 6/12)	$               2,70,000