On January 1, 2014, Park Corporation sold a $600,000, 7.5 percent bond issue (8.

Question

On January 1, 2014, Park Corporation sold a $600,000, 7.5 percent bond issue (8.5 percent market rate). The bonds were dated January 1, 2014, pay interest each June 30 and December 31, and mature in four years.

Required:

Give the journal entry to record the issuance of the bonds.

Give the journal entry to record the interest payment on June 30, 2014. Use effective-interest amortization.

Show how the bond interest expense and the bonds payable should be reported on the June 30, 2014, income statement and balance sheet

Explanation / Answer

3) As assesed from journal entries too, Interest expense are to be recognised in Income Statement at Debit side.

7.5% Bonds are shown at Liabilities side of Balance Sheet

Journal Entries 1-Jan-14 Cash/Bank A/c Dr 600000 7.5% Bonds Cr 600000 (Bonds issued to public) 30-Jun-14 P&L A/c   Dr 22500 Interest on 7.5% Bonds Cr 22500 (Interest due at half yearly rest) Interest on 7.5% Bonds Dr 22500 Cash A/c Cr 22500 (Interest paid at half yearly rest)

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