Question

Fireside, Inc. had the following bond issue:

Date of issue and sale:	May 1, 20-A
Principal amount:	$400,000
Sale price of bonds:	96
Life of bonds:	10 years
Stated rate:	6% a year payable semiannually on October 31 and April 30

Required:

Prepare the following general journal entries.

a. The issuance of the bonds on May 1, 20-A.

b. The first interest payment for 20-A.

c. The adjusting entry for December 31, 20-A.

d. The reversing entry for January 1, 20-B.

If an amount box does not require an entry, leave it blank.

Page: 1

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	a. May 1					1
2						1
3						1
4						1
5	b. Oct. 31					2
6						2
7						2
8						2
9	c. Dec. 31					3
10						3
11						3
12						3
13	d. Jan. 1					4
14						4
15						4

Answer 1

If an amount box does not require an entry, leave it blank.

Page: 1

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	a. May 1	Cash (400000*.96)		384000		1
2		discount on bonds payable		16000		1
3		Bonds payable			400000	1
4						1
5	b. Oct. 31	Interest expense (		24800		2
6		Discount on bonds payable (16000/20)			800	2
7		Cash (400000*6%)			24000	2
8						2
9	c. Dec. 31	Interest expense		8266.67		3
10		Discount on bonds payable			266.67	3
11		Interest payable (400000*6%*2/6)			8000	3
12						3
13	d. Jan. 1	Interest payable		8000		4
14		Discount on bonds payable		266.67		4
15		Interest expense			8266.67	4