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Q22E_2

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Horngren'S Financial And Managerial Accounting
Found in: Page 660

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Short Answer

Journalizing bond issuance and interest payments

On June 30, Parker Company issued 11%, five-year bonds payable with a face value

of $120,000. The bonds are issued at face value and pay interest on June 30 and

December 31.

Requirements

1. Journalize the issuance of the bonds on June 30.

2. Journalize the semiannual interest payment on December 31

The interest expense account is debited with $6,600 and the cash account is credited with $6,600.

See the step by step solution

Step by Step Solution

Step 1: Definition of the bond

The bond is a type of long-term liability that the company issues to complete the need for a large amount of money.

Step 2: Journal entry of the issue of bond

Date

Particulars

Debit

Credit

December 31

Interest Expense

$6,600

Cash

$6,600

(Entry for the payment of interest)

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