Part II On January 1, 2014, FWP sells $2 million of 8% bonds at face value with

Question

Part II On January 1, 2014, FWP sells $2 million of 8% bonds at face value with interest to be paid at the end of each year. Prepare the journal entries on the following dates: (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars not in millions.) (a) January 1, 2014 (the initial bond sale). (b) March 31, 2014 (the end of the first quarter). (c) December 31, 2014 (the payment of interest at the end of the year; assume that the interest owed for each of the first three quarters has been properly accrued).

Explanation / Answer

Serial No. Date Account Title and Explanations Debit($) Credit($) a) 2014 Jan-01 Cash 2000000 Bonds Payable 2000000 (issue of bond recorded) b) Mar-31 Interest expense 40000 Interest payable 40000 (interest accrued for 1st quarter recorded) Jun-30 Interest expense 40000 Interest payable 40000 (interest accrued for 2nd quarter recorded) Sep-30 Interest expense 40000 Interest payable 40000 (interest accrued for 3rd quarter recorded) Dec-31 Interest expense 40000 Interest payable 40000 (interest accrued for 3rd quarter recorded) c) Dec-31 Interest payable 160000 Cash 160000 (interest accrued for the whole year paid)

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