On May 1, 2022, Cucumber Corporation issued $860,000, 12%, 5-year bonds at face value. The bonds were dated May 1, 2022, and pay interest annually on May 1. Financial statements are prepared annually on December 31. Prepare the journal entry to record the issuance of the bonds. Date Account Titles and Explanation Debit Credit May 1, ‘22 Cash 860,000 Bonds Payable 860,000 Prepare the adjusting entry to record the accrual of interest on 12/31/22 Date Account Titles and Explanation Debit Credit Dec. 31, ‘22 Interest Expense Interest Payable Show the balance sheet presentation on Dec. 31, 2022. Prepare the journal entry to record payment of interest on May 1, 2023. Date Account Titles and Explanation Debit Credit May 1, ‘23 Prepare the adjusting entry to record the accrual of interest on 12/31/23. Date Account Titles and Explanation Debit Credit Dec. 31, ‘23 Assume that on January 1, 2024, Cucumber pays the accrual bond interest and calls the bonds. The call price is 101. Record the payment of interest and redemption of the bond. Date Account Titles and Explanation Debit Credit Jan. 1, ‘24 (To record payment of interest) Jan. 1, ‘24 (To record redemption of the bonds)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On May 1, 2022, Cucumber Corporation issued $860,000, 12%, 5-year bonds at face value. The bonds were dated May 1, 2022, and pay interest annually on May 1. Financial statements are prepared annually on December 31.

Prepare the journal entry to record the issuance of the bonds.

Date	Account Titles and Explanation	Debit	Credit
May 1, ‘22	Cash	860,000
	Bonds Payable		860,000

Prepare the adjusting entry to record the accrual of interest on 12/31/22

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, ‘22	Interest Expense
	Interest Payable

Show the balance sheet presentation on Dec. 31, 2022.

Prepare the journal entry to record payment of interest on May 1, 2023.

Date	Account Titles and Explanation	Debit	Credit
May 1, ‘23

Prepare the adjusting entry to record the accrual of interest on 12/31/23.

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, ‘23

Assume that on January 1, 2024, Cucumber pays the accrual bond interest and calls the bonds. The call price is 101. Record the payment of interest and redemption of the bond.

Date	Account Titles and Explanation	Debit	Credit
Jan. 1, ‘24

	(To record payment of interest)
Jan. 1, ‘24


	(To record redemption of the bonds)

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