The board of directors of Monitors Plus authorizes the issue of $7,000 issued on

Question

The board of directors of Monitors Plus authorizes the issue of $7,000 issued on May 31, 2016, at par. Requirements of 9 25-year bonds payable. The se annual interest dates are May and November 30 The bonds are 1. Journalize the following transactions: a. Issuance of half of the bonds on May 31, 2016 b. Payment of interest on November 30, 2016 c. Accrual of interest on December 31, 2016 d. Payment of interest on May 31,2017 Report interest payable and bonds payable as they would appear on the Monitors Plus balance sheet at December 31,2016. 2. Requirement 1. Journalize the transactions a through d. (Record debits first, then credits. Exclude explanations from journal entries.) a. Issuance of half of the bonds on May 31, 2016 Journal Entry Date 2016 Accounts Debit Credit May 3 Cash Bonds Payable

Explanation / Answer

The following journal entries will be prepared:

Interest payable and bonds payable will be reported on the balance sheet as follows:

Date Account Titles and Explanation Debit Credit a. May. 31 Cash (7,000,000/2) 3500000       Bonds Payable 3500000 b. Nov. 30 Interest Expense (7,000,000 x 9% x 1/2) 157500       Cash 157500 c. Dec. 31 Interest Expense (7,000,000 x 9% x 1/12) 26250       Interest Payable 26250 d. May. 31 Interest Expense (7,000,000 x 9% x 5/12) 131250 Interest Payable 26250       Cash 157500

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