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16 February, 09:50

Pina Colada Corp. issued 2,100 8%, 9-year, $1,000 bonds dated January 1, 2017, at face value. Interest is paid each January 1.

(a) Prepare the journal entry to record the sale of these bonds on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(b) Prepare the adjusting journal entry on December 31, 2017, to record interest expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(c) Prepare the journal entry on January 1, 2018, to record interest paid. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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  1. 16 February, 12:45
    0
    The Journal entries are as follows:

    (a) On January 1, 2017

    Cash A/c Dr. $2,100,000

    To bonds payable $2,100,000

    (being bond issued at face value)

    (b) On December 31, 2017

    Bond interest expense A/c Dr. $168,000

    To Interest expense $168,000

    (interest outstanding)

    Bond interest expense = ($2,100,000 * 8%)

    = $168,000

    (c) On January 1, 2018

    Interest payable A/c Dr. $168,000

    To cash $168,000

    (Interest paid)
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