On January 1, 2013, Applied Technologies Corporation (ATC) issued $660,000 in bo

Question

On January 1, 2013, Applied Technologies Corporation (ATC) issued $660,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 8 percent. When the bonds were issued, the market interest rate was 8 percent. The bonds pay interest once per year on December 31. Required: 1. Determine the price at which the bonds were issued and the amount that ATC received at issuance. 2. & 3. Complete the required journal entries to record the bond issuance and the interest payment on December 31, 2013, assuming no interest has been accrued earlier in the year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Explanation / Answer

Applied Technologies Corpoartion issued $660,000 bonds @ 8%, which is same as per market rate.

1. Determine the price at which the bonds were issued and the amount that ATC received at issuance.

Due to same interest rate of Market and Bonds issuance rate , Bonds will issue at par value and amount received by ATC is $660,000.

2. & 3. Complete the required journal entries to record the bond issuance and the interest payment on December 31, 2013

Bond Issuance entry

Cash Account Dr                             $660,000

To Bonds payable account Cr      $660,000

Interest Payment entry

Interest Expense Dr                       $52,800

To Cash Cr                                      $52,800

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