Question

Schlitterbahn Waterslide Company issued 34,000, 10-year, 7 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.

Answer 1

Answer:

Explanation:

The journal entries are shown below:

On January 1

Cash A/c Dr $3,400,000           (34,000 × $100)

     To Bonds payable A/c 3,400,000

(Being issuance of the bond is recorded)

On December 31

Interest expense A/c Dr $238,000         ($3,400,000 × 7%)  

       To Cash A/c $238,000  

(Being interest payment is recorded)