Owen Company issued a $110,000, 11%, the 10-year bond payable at 94 on January 1, 2018.

S12-7 Journalizing bond transactions

Owen Company issued a $110,000, 11%, the 10-year bond payable at 94 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 and amortization of the bond

discount or premium 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: Entry for the issue of bond

Date	Particulars	Debit	Credit
January 1, 2018	Cash	$103,400
	11% Bonds Payable		$103,400
	(Being Entry of the issue of bonds)

Step 3: Entry for the issue of bond

Date	Particulars	Debit	Credit
July 1, 2018	Interest Expense	$6,050
	Discount on Bonds Payable		$330
	Cash		$5,720
	(Being Entry of the payment of interest)

The cash account is debited with $103,400 and the 11% bonds payable account is credited with $103,400.

Sahil Dangi answered 1 year ago

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