The first day of the fiscal year, a company issues a $700,000, 6%, 10-year bond that pays semiannual interest of $21,000 ($700,000 × 6% × ½ year), receiving cash of $700,000.
The first day of the fiscal year, a company issues a $700,000, 6%, 10-year bond that pays semiannual interest of $21,000 ($700,000 × 6% × ½ year), receiving cash of $700,000.
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a.
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Cash | Cash | |
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Bonds Payable | Bonds Payable |
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Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account.
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b. Journalize the entry to record the first interest payment. If an amount box does not require an entry, leave it blank.
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Interest Expense | Interest Expense | |
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Cash | Cash |
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The interest payment is calculated using the following formula: Principle x Interest Rate x Time.
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c. Journalize the entry to record the payment of the principal on the maturity date. If an amount box does not require an entry, leave it blank.
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Bonds Payable | Bonds Payable | |
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Cash | Cash |
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