Laudie Company issued $371,000 of 8%, 10-year bonds on January 1, 2014, at face

Question

Laudie Company issued $371,000 of 8%, 10-year bonds on January 1, 2014, at face value. Interest is payable semiannually on July 1 and January 1. Prepare the journal entry to record the issuance of the bonds. Prepare the journal entry to record the payment of interest on July 1, assuming no previous accrual of interest. Prepare the journal entry to record the accrual of interest on December 31. Prepare the journal entry to record the redemption of bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Explanation / Answer

1) Prepare the journal entry to record the issuance of the bonds Ans) Date Particulars Debit Credit Jan-01-2014 Cash Account Dr $        371,000    To Bonds Payble Account $        371,000 (Being Bonds Issue for Cash ) 2) Prepare the journal entry to record the payment of interest July 01, 2014. Assuming no previous accural of interest Ans) Date Particulars Debit Credit July-01-2014 Interest Expense Account Dr $          14,840    To Cash Account $          14,840 ( Interest Expenses paid) 3) Prepare the journal entry to record the accural of interest on December 31. Ans) Date Particulars Debit Credit Dec-31-2014 Interest Expense Account Dr $          14,840    To Interest Payble Account $          14,840 ( Being Interest Payble but not paid) 4) Prepare the journal entry to record the redemption of bounds at maturity, assuming interest for the last interest period has been paid and recorded Date Particulars Debit Credit Jan-31-2024 Bond Payble Account Dr $        371,000 Interest Expenses Account Dr $            2,473 To Cash Account $        373,473 (Being redemption of bounds at the time of maturity with interest) Interest Amount 371000*8/100*1/12 2473

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