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25 September, 23:21

Schlitterbahn Waterslide Company issued 42,000, 10-year, 5 percent, $100 bonds on January 1 at face value. Interest is payable each December 31. (a) The issuance of these bonds on January 1. (b) The first interest payment on December 31.

Prepare the journal entries related for the above transactions. (If no entry is required for a transaction/event select "No Journal Entry Required" in the first account field.)

1) Schlitterbahn Waterslide Company issued 42,000, 10-year, 5 percent, $100 bonds on January 1 at face value. Interest is payable each December 31. Record the issuance of 42,000 bonds at face value for $100 each.

2) Schlitterbahn Waterslide Company issued 42,000, 10-year, 5 percent, $100 bonds on January 1 at face value. Interest is payable each December 31. Record the interest payment on December 31, 2013.

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  1. 26 September, 02:12
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    1) Entries for the issuance of 42,000 bonds at face value for $100 each from Schlitterbahn Waterslide Company:

    1st January

    Dr Cash 4,200,000

    Cr Bond Payable 4,200,000

    (to record the issuance of 42,000 shares at price of $100 each)

    2) Entries for the interest payment on 31st December 2013 of 42,000 bonds of Schlitterbahn Waterslide Company; assuming no adjusting entry has been made during 2013 to record interest expenses incurred.

    Dr Interest Expenses 210,000

    Cr Cash 210,000

    (to record interest expenses relating to the bond in 2013)

    Explanation:

    1) The cash receipt from the bond issuance equal to Bond Payable is calculated as Bond price x Number of bond issued = 100 x 42,000 = $4,200,000.

    2) The interest expenses in 2013 incurred from the 42,000 bond issued is calculated as: Bond's face value x Interest rate x Number of bond = 100 x 5% x 42,000 = $210,000.
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