Exercise 15-2 On January 1, 2017, Klosterman Company issued $595,000, 14%, 10-ye

Question

Exercise 15-2 On January 1, 2017, Klosterman Company issued $595,000, 14%, 10-year bonds at face value. Interest is payable annually on January 1. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2017 Show List of Accounts Link to Text Prepare the journal entry to record the accrual of interest on December 31, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2017 Show List of Accounts Link to Text Prepare the journal entry to record the payment of interest on January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2018 Show List of Accounts

Explanation / Answer

the following are the required journal entries:

date accounts debit credit january 1 2017 cash a/c 595,000 ..............To BOnds payable 595,000 (to record cash received for bonds payable issued at face value) december 31 2017 Interest expenses a/c 83,300 ..................To Interest payable a/c 83,300 (amount = 595,000 *14%=>83,300, to record interest accrued at the end of year) january 1 2018 Interest payable a/c 83,300 ..............To Cash a/c 83,300 (to record payment of cash on january 1 towards interest)

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