In: Accounting
The board of directors of Allen Services Inc. authorized the
issuance of $400,000 face value, 20-year, 6 percent bonds dated
April 1, 2019, and maturing on April 1, 2039. Interest is payable
semiannually on April 1 and October 1. Allen uses the calendar year
as its fiscal year. The bond transactions that occurred in 2019 and
2020 follow.
DATE | TRANSACTIONS FOR 2019 | |
Apr. | 1 | Issued $260,000 of bonds at face value. |
Oct. | 1 | Paid the semiannual interest on the bonds issued. |
Dec. | 31 | Recorded the adjusting entry for the accrued bond interest. |
31 |
Closed the Bond Interest Expense account to the Income Summary account. |
DATE | TRANSACTIONS FOR 2020 | |
Jan. | 1 | Reversed the adjusting entry made on December 31, 2019. |
Apr. | 1 | Issued $140,000 of bonds at face value. |
1 | Paid the interest for six months on the bonds previously issued. | |
Oct. | 1 | Paid the interest for six months on the outstanding bonds. |
Dec. | 31 | Recorded the adjusting entry for the accrued bond interest. |
31 |
Closed the Bond Interest Expense account to the Income Summary account. |
Required:
Record the transactions in general journal form.
Analyze:
Based on the transactions given, what is the balance in the
Bonds Payable account on December 31,
2019?
Date | Account titles & Explanations | Debit | Credit | ||||
2019 | |||||||
1-Apr | Cash | 260,000 | |||||
Bonds payable | 260,000 | ||||||
1-Oct | interest expense | 7800 | |||||
cash | 7,800 | ||||||
(260,000*6%*6/12) | |||||||
31-Dec | interest expense | 3900 | |||||
interest payable | 3,900 | ||||||
(260,000*6%*3/12) | |||||||
31-Dec | income Summary | 11700 | |||||
interest expense | 11,700 | ||||||
2020 | |||||||
1-Jan | interest payable | 3,900 | |||||
interest expense | 3,900 | ||||||
1-Apr | cash | 140,000 | |||||
bonds payable | 140,000 | ||||||
1-Apr | interest expense | 7,800 | |||||
cash | 7,800 | ||||||
1-Oct | interest expense | 12000 | |||||
interest payable | 12,000 | ||||||
(400,000*6%*6/12) | |||||||
31-Dec | interest expense | 6000 | |||||
interest payable | 6,000 | ||||||
(400,000*6%*3/12) | |||||||
31-Dec | income summary | 21800 | |||||
interest expense | 21,800 | ||||||
2) | bonds payable = $400,000 | ||||||