Ashton, Inc., which closes its books on December 31, is authorized to issue $800,000 of nine percent, 20-year bonds dated May 1, with interest payments on November 1 and May 1. Required Prepare journal entries to record the following events, assuming that the bonds were sold at 100 plus accrued interest on October 1: a. The bond issuance. b. Payment of the first semiannual period’s interest on November 1. c. Accrual of bond interest expense at December 31. d. Payment of the semiannual interest on May 1 of the following year. e. Retirement of $400,000 of the bonds at 101 on May 1, Year 2 (immediately after the interest payment on that date). Round to the nearest dollar. Use 360 days for calculations. General Journal Date Description Debit Credit a. Oct.1 Bonds Payable Issuance of bonds at 100 plus five months' accrued interest. b. Nov.1 Bond Interest Payable To record semiannual interest payment. c. Dec.31 To accrue interest expense. d. May 1 Bond Interest Payable To record semiannual interest payment. e. May 1 Bonds Payable To record retirement of bonds.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...

See similar textbooks

Related questions

Question

Bonds Payable Journal Entries; Issued at Par Plus Accrued Interest
Ashton, Inc., which closes its books on December 31, is authorized to issue $800,000 of nine percent, 20-year bonds dated May 1, with interest payments on November 1 and May 1.

Required
Prepare journal entries to record the following events, assuming that the bonds were sold at 100 plus accrued interest on October 1:
a. The bond issuance.
b. Payment of the first semiannual period’s interest on November 1.
c. Accrual of bond interest expense at December 31.
d. Payment of the semiannual interest on May 1 of the following year.
e. Retirement of $400,000 of the bonds at 101 on May 1, Year 2 (immediately after the interest payment on that date). Round to the nearest dollar. Use 360 days for calculations.

General Journal
Date	Description	Debit	Credit
a.
Oct.1
	Bonds Payable

	Issuance of bonds at 100 plus five months' accrued interest.
b.
Nov.1	Bond Interest Payable


	To record semiannual interest payment.
c.
Dec.31

	To accrue interest expense.
d.
May 1	Bond Interest Payable


	To record semiannual interest payment.
e.
May 1	Bonds Payable


	To record retirement of bonds.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions