Question

Problem 1 On January 1, 2015 XYZ Company issued $100,000 of 10 year 10% bonds dated January 1, 2015. Interest on the bonds are payable semi-annually. The market rate of interest for a similar bond with similar risk factors was also 10% Required – prepare all the necessary journal entries and T-accounts for 2015 and 2016 and the journal entry and T-account upon bond maturity on December 31, 2019

XYZ Company issued 10,000 shares of common stock for $1,000,000. The common stock has a par value of $1.00. Prepare the journal entry and T – accounts for the stock issuance

Answer 1

Necessary journal entries and T-accounts for 2015 and 2016 and the journal entry and T-account upon bond maturity on December 31, 2019, is as prepared below:

Year	Particulars	L.F	Debit ($)	Credit ($)
2015
Jan-01	Cash (10,000*100)		1,000,000
	Bond Payable			1,000,000
	(For bonds issued at face value)
Jun-30	Interest Expense (1,000,000*10%*6/12)		50,000
	Cash			50,000
	(For Interest paid for 6 months)
Dec-31	Interest Expense (1,000,000*10%*6/12)		50,000
	Cash			50,000
	(For Interest paid for 6 months)
2016
Jun-30	Interest Expense (1,000,000*10%*6/12)		50,000
	Cash			50,000
	(For Interest paid for 6 months)
Dec-31	Interest Expense (1,000,000*10%*6/12)		50,000
	Cash			50,000
	(For Interest paid for 6 months)
Dec-31	Bond Payable		1,000,000
	Cash			1,000,000
	(For cash paid on maturity)

Working:

Cash Account
2015
Jan-01	1,000,000	Jun-30	50,000
			50,000
2016		Jun-30	50,000
		Dec-31	50,000
Bonds Payable
2015		Jan-01	1,000,000
2019
Dec-31	1,000,000
Interest Expense
2015
Jun-30	50,000
Dec-31	50,000
2016
Jun-30	50,000
Dec-31	50,000