Power Company issued a $1,000,000, 5%, 5-year bond payable at face value on January 1, 2018.

Journalizing bond transactions

Power Company issued a $1,000,000, 5%, 5-year bond payable at face value on

January 1, 2018. Interest is paid semiannually on January 1 and July 1.

Requirements

1. Journalize the issuance of the bond payable on January 1, 2018.

2. Journalize the payment of semiannual interest on July 1, 2018.

Solutions

Expert Solution

Step 1: Definition of bonds payable

Bond payable is known as a type of liability account. It contains the amount owed by the bond issuer.

Step 2: Journal entry of the issue of bond

Date	Particulars	Debit	Credit
January 1, 2018	Cash	$1,000,000
	5% Bonds Payable		$1,000,000
	(Being Entry of the issue of bonds)

The cash account is debited with $1,000,000, and the 5% bonds payable charge is credited with $1,000,000.

Sahil Dangi answered 1 year ago

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