Question

In: Accounting

On March 1, 2017, Jagger Metal Corp. issued 8% bonds dated January 1, 2017. The bonds...

  1. On March 1, 2017, Jagger Metal Corp. issued 8% bonds dated January 1, 2017. The bonds have a $900,000 par value, mature in 20 years, and pay interest semiannually on June 30 and December 31. The bonds were sold to investors at their par value plus the two months’ interest that had accrued since the original issue date.

    a. How much accrued interest was paid to Jagger by the purchasers of these bonds on March 1, 2017?

Accrued Interest

b. Prepare the journal entries that Jagger would make to record: (1) the issuance of the bonds on March 1, 2017; (2) the first interest payment on June 30, 2017; and (3) the second interest payment on December 31, 2017.

No

Date

General Journal

Debit

Credit

1

March 01, 2017

2

June 30, 2017

3

December 31, 2017

Solutions

Expert Solution

a
Accrued Interest 12000 =900000*8%*2/12
b
Date General Journal Debit Credit
1 March 01, 2017 Cash 912000
    Bonds payable 900000
    Interest payable 12000
2 June 30, 2017 Interest expense 24000 =900000*8%*4/12
Interest payable 12000
     Cash 36000
3 December 31, 2017 Interest expense 36000 =900000*8%*6/12
     Cash 36000

ekkarill92 answered 2 years ago
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