Question

On April 1, 2015, Eviline, Inc. issued 400 $1,000 five-year, 10% bonds at 100.

Interest is payable annually on April 1.

1. The entry to record the sale / issuance on 4.1.15 is:

2. The adjusting entry to accrue the interest on 12.31.15 is:

3. The entry to record the payment of the interest on 4.1.16 is:

4. The contract rate is 10% for these bonds. What is the market rate?

Answer 1

Journal entries
Date	Particulers		Dr	CR
04-01-2015	Bond Holders A/c                     Dr		40000
Loss on issue of Bonds		360000
To 10 % Bonds A/c			400000
(Issued 400 $1000 five year 10% Bond @ $100)
04-01-2015	Bank A/C                                  Dr		40000
To Bond holders A/c			40000
(Payment recived for 400 $1000 five year 10% Bond @ $100)
12-31-15	Interest on Bond A/c           Dr		30000
To Bond holders A/c			30000
(The interest due for 9 months)
12-31-15	Bond holders A/c                Dr		40000
To Bank A/c			40000
(Interst paid off)
04-01-2016	Bond holders A/c                Dr		40000
To Bank A/c			40000
(Interst paid off)