The board of directors of LaptopsLaptops Plus authorizes the issue of $ 9,000,00

Question

The board of directors of LaptopsLaptops Plus authorizes the issue of $ 9,000,000 $9,000,000 of 88%, 2020-year bonds payable. The semiannual interest dates are May 31 and November 30. The bonds are issued on May 31,2016 at par.

Requirements

1.

Journalize the following transactions:

a. Issuance of half of the bonds on May 31, 20162016

b. Payment of interest on November 30, 20162016

c. Accrual of interest on December 31, 20162016

d. Payment of interest on May 31, 20172017

2.

LaptopsLaptops

1.

Journalize the following transactions:

a. Issuance of half of the bonds on May 31, 20162016

b. Payment of interest on November 30, 20162016

c. Accrual of interest on December 31, 20162016

d. Payment of interest on May 31, 20172017

2.

Report interest payable and bonds payable as they would appear on the

LaptopsLaptops

Plus balance sheet at December 31,2016.

Explanation / Answer

Journal entry :

2) Balance sheet presentation :

Date accounts & explanation debit credit May 31,2016 Cash 9000000      Bonds payable 9000000 Nov 30 2016 Interest expense (9000000*8%*6/12) 360000     Cash 360000 Dec 31,2016 Interest expense (360000/6) 60000     Interest payable 60000 May 31,2017 Interest payable 60000 Interest expense 300000      Cash 360000

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