P10-3A Prepare entries to record issuance of bonds, interest accrual, and bond r
ID: 2553122 • Letter: P
Question
P10-3A Prepare entries to record issuance of bonds, interest accrual, and bond redemption LO 3. 5) On May 1, 2019, Herron Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2019, and pay interest annually on May 1. Financial statements are prepared annually on December 31 Instructions (a) Prepare the journal entry to record the issuance of the bonds. (b) Prepare the adjusting entry to record the accrual of interest on December 31,2019 (c) Show the balance sheet presentation on December 31,2019. (d) Prepare the journal entry to record payment of interest on May 1, 2020. Int. exp. $18,000 (e) Prepare the adjusting entry to record the accrual of interest on December 31, 2020 () Assume that on January 1, 2021, Herron pays the accrued bond interest and calls the bonds at 102. Record the payment of interest and redemption of the bonds. Loss $12,000Explanation / Answer
Solution:-
(A) 1 May 2019:-
Cash Dr 600000
To Bond Payable 600000
(b) 31 Dec 2019:-
Interest Exp Dr. 36000
To int payable 36000
(c) On 31 December:-
Cash Shown on Asset side = 600000
Bond Payable shown on Liability side = 600000
Int Payable shown on liability side = 36000
(d) On 1 May :-
Int Payable Dr 36000
Int Exp Dr 18000
To cash 54000
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