Q22E_1 - Horngren'S Financial And Managerial Accounting

Question

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

Step-by-Step Solution

Answer

The cash account is debited with $120,000, and the bonds payable account is credited with $120,000.

Step 1: Definition of the bond

The bond is a long-term liability that organisation issues to arrange the large amount of money from the market.

Step 2: Journal entry of the issue of bond

Date	Particulars	Debit	Credit
June 30	Cash	$120,000
	11% Bonds Payable		$120,000
	(Being entry is made to record the issue of the bond)