Power Company issued a $ 1,000,000 , 5 % , 10 -year bond payable at at face value on January 1, 2016. Requirements

1. Journalize the issuance of the bond payable on January 1, 2016.

2. Journalize the payment of semiannual interest on July 1, 2016. (Record debits first, then credits. Select explanations on the last line of the journal entry.)

Answer and Explanation:

The journal entries are shown below:

1. Cash Dr $1,000,000

To Bond payable $1,000,000

(Being the issuance of the bond is recorded)

For recording this we debited the cash as it increased the assets and credited the bond payable as it also increased the liabilities

2. Interest Expense Dr ($1,000,000 * 5% * 1 : 2) $25,000

To Cash $25,000

(Being the interest expense is recorded)

For recording this we debited the interest expense as it increased the expense and credited the cash as it decreased the asset