Exercise 10-13 Cullumber Company issued $420,000 of 10%, 20-year bonds on Januar

Question

Exercise 10-13

Cullumber Company issued $420,000 of 10%, 20-year bonds on January 1, 2017, at face value. Interest is payable annually on January 1.

Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the accrual of interest on December 31, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the payment of interest on January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Exercise 10-13

Cullumber Company issued $420,000 of 10%, 20-year bonds on January 1, 2017, at face value. Interest is payable annually on January 1.

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Jan 1, 2017 Cash 420000 Bonds payable 420000 (To record bonds issue) Dec 31,2017 Interest expense 42000 Interest payable 42000 (To record accured interest) Jan 1,2018 Interest payable 42000 Cash 42000 (To record interest paid) Jan 1,2037 Bonds payable 420000 Cash 420000 (To record bonds maturity)

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