On March 31, 2011, Gardner Corporation received authorization to issue $50,000 o

Question

On March
31, 2011, Gardner Corporation received authorization to issue $50,000 of 9 percent, 30-year bonds payable. The bonds pay interest on March 31 and September 30. The entire issue was dated March 31, 2011, but the bonds were not issued until April 30, 2011. They were issued at face value

Prepare the journal entry at April 30, 2011, to record the sale of the bonds.

Debit
Credit
Credit


Prepare the journal entry at September 30, 2011, to record the semiannual bond interest payment

Debit
Credit
Credit


Prepare the adjusting entry at December 31, 2011, to record bond interest expense accrued since September 30, 2011. (Assume that no monthly adjusting entries to accrue interest expense had been made prior to December 31, 2011.)

Debit
Credit
Credit

Explanation / Answer

Prepare the journal entry at April 30, 2011 to record the sale of the bonds.
Dr Cash $50,375
Cr Bonds payable $50,000
Cr Bond interest payable $375 ($50,000 x 9% x 1/12)

Prepare the adjusting entry at September 30, 2011 to record the semi-annual bond interest payment.
Dr Bond interest payable $375 (1 mth's interest)
Dr Bond interest expense $1,875 (5 mths' interest)
Cr Cash $2,250

Prepare the adjusting entry at December 31, 2011 to record bond interest expense accrued since September 30, 2011. (Assume no monthly adjusting entries to accrue interest expense had been made prior to December 31, 2011).
Dr Bond interest expense $1,125 (3 mths' interest)
Cr Bond interest payable $1,125

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