In: Accounting
Question: Journalizing bond issuance and interest payments
On June 30, Parker Company issued 11%, five-year bonds payable with a face value
of $120,000. The bonds are issued at face value and pay interest on June 30 and
December 31.
Requirements
1. Journalize the issuance of the bonds on June 30.
2. Journalize the semiannual interest payment on December 31
Step 1: Definition of the bond
The bond is a type of long-term liability that the company issues to complete the need for a large amount of money.
Step 2: Journal entry of the issue of bond
Date |
Particulars |
Debit |
Credit |
June 30 |
Cash |
$120,000 |
|
|
11% Bonds Payable |
|
$120,000 |
|
(Being entry is made to record the issue of the bond) |
|
|
|
|
|
|
Date |
Particulars |
Debit |
Credit |
December 31 |
Interest Expense |
$6,600 |
|
|
Cash |
|
$6,600 |
|
(Entry for the payment of interest) |
|
|
|
|
|
|
The cash account is debited with $120,000, and the bonds payable account is credited with $120,000.