On January 1 Stanhope Company issued $100,000, 7%, 10-year bondsat face value. I

Question

On January 1 Stanhope Company issued $100,000, 7%, 10-year bondsat face value. Interest is payable annually on January 1.

Prepare journal entries to record the following events.

The issuance of the bonds.

The accrual of interest on December 31.

The payment of interest on January 1.

Date Account /Description Debit Credit Jan. 1 Gain on bond redemptionAccounts receivableBonds payableLoss on bond redemptionMortgage note payableDiscount on bonds payableBond interest payableBond interest expensePremium on bonds payableCash $          Premium on bonds payableGain on bond redemptionBonds payableLoss on bond redemptionCashMortgage note payableBond interest expenseDiscount on bonds payableBond interest payableAccounts receivable $

Explanation / Answer

1-Jan

31-Dec

1-Jan

The issuance ofBonds

1-Jan

Cash $100,000        BondsPayable $100,000 The accrual of Interest onDecember 31

31-Dec

Bonds Interest expense $7,000            BondsInterest payable $7,000 (7% of $100000) The payment of Interest on 1Jan.

1-Jan

Bond Interest Payable $7,000           Cash $7,000

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