The Martinez Company issued $330,000 of 13% bonds on January 1, 2017. The bonds
ID: 2561979 • Letter: T
Question
The Martinez Company issued $330,000 of 13% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds are issued at face value.
Prepare Martinez’s journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.)
Explanation / Answer
Solution:
Primary Working:
Par Value of Bonds Payable = $330,000
Stated Interest Rate = 13%
Semi Annual Interest = $330,000*13%*1/2 = $21,450
Journal Entries
Transaction #
Date
Account Name
Debit
Credit
(a)
Jan.1, 2017
Cash
$330,000
Bonds Payable
$330,000
(Bonds are issued at par)
(b)
July.1, 2017
Interest Expense (330,000*13%*1/2)
$21,450
Cash
$21,450
(Semi annual interest paid on bonds)
(c )
Dec.31, 2017
Interest Expense
$21,450
Interest Payable
$21,450
(Semi annual interest expenses recorded and accrued)
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question. Please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Transaction #
Date
Account Name
Debit
Credit
(a)
Jan.1, 2017
Cash
$330,000
Bonds Payable
$330,000
(Bonds are issued at par)
(b)
July.1, 2017
Interest Expense (330,000*13%*1/2)
$21,450
Cash
$21,450
(Semi annual interest paid on bonds)
(c )
Dec.31, 2017
Interest Expense
$21,450
Interest Payable
$21,450
(Semi annual interest expenses recorded and accrued)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.