Question

exercise 14-2 (algo) recording bond issuance at par, interest payments, and bond maturity lo p1 brussels enterprises issues bonds at par dated january 1, 2021, that have a $3,600,000 par value, mature in four years, and pay 7% interest semiannually on june 30 and december 31. 1. record the entry for the issuance of bonds for cash on january 1. 2. record the entry for the first semiannual interest payment and the second semiannual interest payment. 3. record the entry for the maturity of the bonds on december 31, 2024 (assume semiannual interest is already recorded). view transaction list journal entry worksheet < 1 2 3 4 record the issuance of bonds for cash on january 1. note: enter debits before credits. date general journal debit credit january 01

Explanation:

Step1: Record bond - issuance entry

When bonds are issued at par, cash is debited for the par - value of the bonds and Bonds Payable is credited for the same amount.

Date	General Journal	Debit	Credit
	Bonds Payable		$3,600,000

Step2: Record first semi - annual interest payment

The semi - annual interest rate is $\frac{7\%}{2}=3.5\%$. The interest expense is calculated as $3,600,000\times3.5\% = 126,000$.

Date	General Journal	Debit	Credit
	Cash		$126,000$

Step3: Record second semi - annual interest payment

Same calculation as the first semi - annual interest payment.

Date	General Journal	Debit	Credit
	Cash		$126,000$

Step4: Record bond maturity entry

At maturity, Bonds Payable is debited for the par - value and cash is credited for the same amount.

Date	General Journal	Debit	Credit
	Cash		$3,600,000$

Answer:

Date	General Journal	Debit	Credit
	Bonds Payable		$3,600,000$
June 30, 2021	Interest Expense	$126,000$
	Cash		$126,000$
December 31, 2021	Interest Expense	$126,000$
	Cash		$126,000$
December 31, 2024	Bonds Payable	$3,600,000$
	Cash		$3,600,000$