Presented below are two independent situations. For each of these two independen

Question

Presented below are two independent situations.

For each of these two independent situations, prepare journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

1.

Vaughn Company:

2.

Bramble Company:

1. On January 1, 2017, Vaughn Company issued $156,000 of 7%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1. 2. On June 1, 2017, Bramble Company issued $108,000 of 10%, 10-year bonds dated January 1 at par plus accrued interest. Interest is payable semiannually on July 1 and January 1.

Explanation / Answer

Vaughn Company - Journal Entries

Date

Account Titles and Explanation

Debit

Credit

1-Jan-17

Cash

$156,000

Bonds Payable

$156,000

(To record issue of bonds by Vaughn Company)

4/1/2017

Interest Expense

$2,730

Cash

$2,730

(To record quarterly interest payment)

31-Dec-17

Interest Expense

$2,730

Interest Payable

$2,730

(To record interest accrued)

Bramble Company

1-Jun-17

Cash

$112,500

Bonds Payable

$108,000

Interest Expense

$4,500

(To record issue of bonds plus accrued interest for five months - 108,000 x10% x 5/12 = $4,500)

1-Jul-17

Interest Expense

$5,400

Cash

$5,400

(To record payment of semiannual interest, 108,000 x 10% x 6/12 = 5,400)

31-Dec-17

Interest Expense

$5,400

Interest Payable

$5,400

(To record accrued interest expense)

Interest expense for Vaughn Company –

Quarterly interest expense = 156,000 x 7% x 3/12 = $2,730

Vaughn Company - Journal Entries

Date

Account Titles and Explanation

Debit

Credit

1-Jan-17

Cash

$156,000

Bonds Payable

$156,000

(To record issue of bonds by Vaughn Company)

4/1/2017

Interest Expense

$2,730

Cash

$2,730

(To record quarterly interest payment)

31-Dec-17

Interest Expense

$2,730

Interest Payable

$2,730

(To record interest accrued)

Bramble Company

1-Jun-17

Cash

$112,500

Bonds Payable

$108,000

Interest Expense

$4,500

(To record issue of bonds plus accrued interest for five months - 108,000 x10% x 5/12 = $4,500)

1-Jul-17

Interest Expense

$5,400

Cash

$5,400

(To record payment of semiannual interest, 108,000 x 10% x 6/12 = 5,400)

31-Dec-17

Interest Expense

$5,400

Interest Payable

$5,400

(To record accrued interest expense)

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