On August 1, 2017, Flint Corporation issued $502,800, 7%, 10-year bonds at face

Question

On August 1, 2017, Flint Corporation issued $502,800, 7%, 10-year bonds at face value. Interest is payable annually on August 1. Flint’s year-end is December 31.

1) Prepare journal entry to record the issuance of the bonds.

2) Prepare journal entry to record the accrual of interest on December 31, 2017.

3) Prepare journal entry to record the payment of interest on August 1, 2018.

On August 1, 2017, Flint Corporation issued $502,800, 7%, 10-year bonds at face value. Interest is payable annually on August 1. Flint’s year-end is December 31.

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Aug 1,2017 Cash 502800 Bonds payable 502800 Dec 31,2017 Interest expense (502800*7%*5/12) 14665 Interest payable 14665 Aug 1,2018 Interest expense (502800*7%*7/12) 20531 Interest payable 14665 Cash 35196

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