On March 312, 2018 Gardner Corporation recieved authorization to issue $50,000 o

Question

On March 312, 2018 Gardner Corporation recieved authorization to issue $50,000 of 9 percent, 30-year bods payable. The bonds pay interest on march 31 and September 30. the entire issue was dated March 31, 2018, but he bonds were not issues until Arpil 30, 2018. They were issued at face value.

a) prepare the journal entry at April 30, 2018, to record teh sale of the obnds.

b) prepare the journal entry at september 30, 2018, to record the semiannual bond interest payment

c) prepeare the adjusting entry at december 31, 2018, to record bond interest expense accrued since September 30, 2018 (assume that no monthly adjusting entries to accrue interest expense had been made prior to december 31, 2018)

d) Explain why the issuing corporation charged its bond investors for interest accrued in April 2018, prior to the issuance date (see part b).

Explanation / Answer

d. Accrued interest in April 2018, prior to the issuance date is a current liability for the company in order to pay interest to investors which is charged or reported on the Income statment as expense and Balance sheet as current liability as per Accrual basis of accounting.

Date Accounts title Dr. Cr. a April 30, 2018 Cash $50375 To Bonds payable $50,000 To Bonds interest payable [$50000*9%*1/12 months] $375 b september 30, 2018 Bonds interest payable 375 Bond interest expense [$50000 * 9% * 5/12 months(May - Sept.)] 1875 To cash 2250 c December 31, 2018, Bond interest expense [$50000 * 9% * 3/12 months(sept. - Dec.)] 1125 To Bonds interest payable 1125

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.