Question

Entries for issuing bonds

Instructions:

Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued $1,200,000 of 10-year, 12% bonds on May 1 of the current year at face value, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.

Journalize the entries to record the following selected transactions for the current year. Refer to the Chart of Accounts for the exact wording of account titles.

May	1	Issued the bonds for cash at their face amount.
Nov.	1	Paid the interest on the bonds.
Dec.	31	Recorded accrued interest for two months.

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CHART OF ACCOUNTS
Thomson Co.
General Ledger
ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 142 Store Supplies 151 Prepaid Insurance 191 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 521 Sales Salaries Expense 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 534 Selling Expenses 535 Rent Expense 536 Insurance Expense 537 Office Supplies Expense 538 Store Supplies Expense 541 Bad Debt Expense 561 Depreciation Expense-Store Equipment 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense 711 Loss on Redemption of Bonds

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

JOURNAL

Journalize the transactions. Refer to the Chart of Accounts for the exact wording of account titles.

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5	-----------------------	Adjusting Entries-------------------------------------	--------------------	----------------------	-------------------	---------------	--------------------	---------------------------
6
7

Answer 1

Journal Entries
Date	Account Title and explanation	Post Ref.	Debit	Credit	Assets	Liabilities	Equity
May, 01	Cash		$            12,00,000		1200000	0	No Effect
	To 12% Bonds Payable			$               12,00,000	0	1200000	No Effect
	(To Record the issuance of Bonds)
Nov, 01	Interest Expense		$                  72,000			No Effect	-72000
	To Cash			$                     72,000	-72000	No Effect
	(To record the interest Expenses and payment)
	Interest Expense		$                  24,000		No Effect	0	-24000
Dec, 31	To Interest Payable			$                     24,000	No Effect	24000	0
	(To record the interest Expenses)
	Note : 1
	Interest Payable as on Nov, 01
	Par Value of the bonds		$            12,00,000
	Interest rate 12% for one year =		$               1,44,000
	Interest Paid for Six Month ($ 144,000 X 6/12)		$                  72,000
	Note : 2
	Interest Payable as on Dec, 31
	Par Value of the bonds		$            12,00,000
	Interest rate 12% for one year =		$               1,44,000
	Interest Paid for Two Month ($ 144,000 X 2/12)		$                  24,000