PERFORMANCE QUESTION Magnificent Company issued a $20,000,000 bond on January 1
ID: 2335641 • Letter: P
Question
PERFORMANCE QUESTION Magnificent Company issued a $20,000,000 bond on January 1 of year 1, with an annual interest rate of 6%, paid semiannually, with a maturity (payable) date S years later. Assume the bo A. Prepare the journal entry to record the sale of the bond on January 1, Year 1 B. Prepare the journal entry to record the first semi-annual interest payment on the bond C. Prepare the journal entry to record the payment of the bond on the maturity date in year S D. What would the January 1, journal entry be if the bond was sold for $19,500,000 instead of at face?Explanation / Answer
A. Entry to record sale of bond on january 1 year 1
narration: Being bonds issued to bondholders at par.
* bond issue is also called sale of bond to bond holders
** bonds issued at market rate is known to be issued at par.
B.Entry to record first semi annual interest payment of bond
first semi-annual payment of interest
narration : (Being first payment of interest on bonds paid semi annualy)
* calculation of semi annual payment of interest
20,000,000 * 6/100 * 6/12 = 6,00,000
second semi-annual payment of interest
narration : (Being first payment of interest on bonds paid semi annualy)
* calculation of semi annual payment of interest
20,000,000 * 6/100 * 6/12 = 6,00,000
C. Entry to record payment of bond on maturity year 5
20,000,000
narration: being payment of bond on maturity i.e year 5
D.Entry for bond issued at discount
narration: being sale of bonds to bond holders at discount.
particulars debit credit cash account 20,000,000 to bonds payable 20,000,000Related Questions
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