Entries for Issuing Bonds Thomson Co. produces and distributes semiconductors fo

Question

Entries for Issuing Bonds

Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued $480,000 of 15-year, 8% bonds on May 1 of the current year at face value,, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.

Journalize the entries to record the above selected transactions for the current year.

May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. Dec. 31 Recorded accrued interest for two months.

Explanation / Answer

1-May Cash 480000     Bonds Payable 480000 1-Nov Interest Expense 19200 =480000*8%/2       Cash 19200 31-Dec Interest Expense 6400 =480000*8%/12*2       Interest payable 6400

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