E814 Issuing bonds Cyber Tech Inc. produces and distributes fiber optic cable fo

Question

E814 Issuing bonds Cyber Tech Inc. produces and distributes fiber optic cable for use by telecommunications companies. Cyber Tech Inc. issued $50,000,000 of 20-year, 6% bonds on March at their face amount, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year. Illustrate the effects on the accounts and financial statements of recording the following selected transactions for the current year r. 1. Issued the bonds for cash at their face amount Sept Dec. 1. Paid the interest on the bonds. 31. Recorded accrued interest for four months.

Explanation / Answer

Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Mar Cash                                                         Dr.          50,000,000    To Bonds Payable          50,000,000 (Record the issue of Bonds) 1-Sep Interest Expenses                              Dr.            1,500,000    To Cash            1,500,000 (record the Interest Paid) 31-Dec Interest Expenses                              Dr.            1,000,000    To Interest Payable            1,000,000 (record the Interest Accrued) Balance Sheet Date Assets = Liabilities + Equity Income Statement 1-Mar Cash    50,000,000 = Bonds Payable    50,000,000 +                                      -                       -                                         -                     -   1-Sep Cash    (1,500,000) =                                      -                       -   + Retained Earnings (1,500,000) Interest Expenses    1,500,000 31-Dec                                -                       -   Interest Payable      1,000,000 Retained Earnings (1,000,000) Interest Expenses    1,000,000

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