Question

destination company issued a $130,000, 7.0%, 2-year bond payable. journalize the following transactions for destination company, and include an explanation for each entry: a. issuance of the bond payable at face value on january 1, 2025. b. payment of semiannual cash interest on july 1, 2025. c. payment of the bond payable at maturity, assuming the last interest payment had already been recorded. (give the date.) (record debits first, then credits. select explanations on the last line of the journal entry.) issued bonds payable. b. payment of semiannual cash interest on july 1, 2025. date accounts and explanation debit credit jul 1, 2025 interest expense 4,550 cash 4,550 paid semiannual interest payment. c. payment of the bond payable at maturity, assuming the last interest payment had already been recorded. (give the date.) (all interest has been paid to date.) date accounts and explanation debit credit jan. 1, 2027

Explanation:

Step1: Journalize bond issuance

When bonds are issued at face value, Cash is debited (increases) and Bonds Payable is credited (increases).

$$\begin{align*} \text{Debit: Cash}&=\$130,000\\ \text{Credit: Bonds Payable}&=\$130,000 \end{align*}$$

Step2: Calculate semi - annual interest

The annual interest rate is \(r = 7\%\) or \(0.07\), and the face value of the bond is \(F=\$130,000\). The semi - annual interest rate \(i=\frac{0.07}{2}=0.035\).
The semi - annual interest payment \(I = F\times i=\$130,000\times0.035=\$4,550\). When paying interest, Interest Expense is debited (increases) and Cash is credited (decreases).

Step3: Journalize bond maturity payment

At maturity, when the bond is paid off (assuming all interest is already paid), Bonds Payable (a liability) is debited (decreases) and Cash (an asset) is credited (decreases).

$$\begin{align*} \text{Debit: Bonds Payable}&=\$130,000\\ \text{Credit: Cash}&=\$130,000 \end{align*}$$

Answer:

a.

Date	Accounts and Explanation	Debit	Credit
	Bonds Payable		130,000
	Issued bonds payable at face value

b.

Date	Accounts and Explanation	Debit	Credit
	Cash		4,550
	Paid semiannual interest payment

c.

Date	Accounts and Explanation	Debit	Credit
	Cash		130,000
	Paid bond payable at maturity