The board of directors of Delta Health Spa authorizes the issuance of $600,000 o

Question

The board of directors of Delta Health Spa authorizes the issuance of $600,000 of 5%, 10-year bonds payable. The semiannual interest dates are May 31 and November 30. The bonds are issued on July 31, 2012, at par plus accrued interest.


1. Journalize the following transactions (Round your answers to the nearest whole dollar.):
a. Issuance of the bonds on July 31, 2012.
b. Payment of interest on November 30, 2012.
c. Accrual of interest on December 31, 2012.
d. Payment of interest on May 31, 2013.


2. Report interest payable and bonds payable as they would appear on the Delta balance sheet at December 31, 2012.

Explanation / Answer

1. a. Issuance of the bonds on July 31, 2012. Cash (Dr.) 605000 Bonds payable (Cr.) 600000 Interest payable (Cr.) 5000 b. Payment of interest on November 30, 2012. Interest expense (Dr.) 10000 Interest payable (Dr.) 5000 Cash (Cr.) 15000 c. Accrual of interest on December 31, 2012. Interest expense (Dr.) 2500 Interest payable (Cr.) 2500 d. Payment of interest on May 31, 2013. Interest expense (Dr.) 12500 Interest payable (Dr.) 2500 Cash (Cr.) 15000 2. Interest payable 2,500 Bonds payable 600000

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