Question

Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued $360,000 of 10-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. Refer to the Chart of Accounts for exact wording of account titles. May Nov. 1 1 Issued the bonds for cash at their face amount. Paid the interest on the bonds. Dec. 31 Recorded accrued interest for two months.

CHART OF ACCOUNTS
Thomson Co.
General Ledger
ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 142 Store Supplies 151 Prepaid Insurance 191 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 521 Sales Salaries Expense 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 534 Selling Expenses 535 Rent Expense 536 Insurance Expense 537 Office Supplies Expense 538 Store Supplies Expense 541 Bad Debt Expense 561 Depreciation Expense-Store Equipment 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense 711 Loss on Redemption of Bonds

Answer 1

Journal

Date	Account title	Debit	Credit
May 1	Cash	360,000
	Bonds payable		360,000
	(To record issue of bonds at par)
Nov. 1	Interest expense	14,400
	Cash		14,400
	(To record semi annual interest expense payment)
Dec. 31	Interest expense	4,800
	Interest payable		4,800
	(To record interest expense for 2 months)

Interest expense to be recorded on Nov. 1 = Par value of bonds x Interest rate x Time period

= 360,000 x 8% x 6/12

= $14,400

Interest expense to be recorded on Dec. 31 = Par value of bonds x Interest rate x Time period

= 360,000 x 8% x 2/12

= $4,800

Please ask if you have any query related to the question. Thank you