Question

The Colson Company issued $300,000 of 10% bonds on January 1, 2020. The bonds are due January 1, 2025, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Colson's journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.

Answer 1

The Journal entries are as follows:

(a) on January 1, 2020

cash A/c Dr. $300,000

To Bond payable $300,000

(Bond issued)

(b) On July 1,

Interest expense A/c Dr. $15,000

To cash $15,000

(Interest paid)

Interest expense = $300,000 × 10% × (6/12)

= $15,000

(c) On December 31,

Interest expense A/c Dr. $15,000

To Interest payable $15,000

(To record the interest expense due)