Question

Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson issued $840,000 of 25-year, 8% bonds on May 1 of the current year at face value, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions for the current year.

May 1 Issued the bonds for cash at their face amount.
Nov. 1 Paid the interest on the bonds.

Answer 1

Answer:

May 1

Dr Cash $840,000

Cr Bonds payable $840,000

Nov 1

Dr Interest expense $33,600

Cr Cash $33,600

Explanation:

Preparation of the journal entry to record May 1 Issued bonds for cash at their face amount

May 1

Dr Cash $840,000

Cr Bonds payable $840,000

Preparation of the journal entry to record Nov. 1 interest on the bonds.

Nov 1

Dr Interest expense $33,600

Cr Cash $33,600

(840,000*8%*6/12)