Question

(5 points) On 01-01-15, B issued $3,000,000 of 3.5%, 5-year term bonds. The bonds pay interest every July 1 and January 1. At the time B issued the bonds, similar bonds paid 3%. Upon issuing the bonds, B incurred and paid $27,000 of bond issuance costs. B uses the effective-interest method to amortize any bond discount or premium. B only prepares AJEs every December 31. Prepare the entries B should make on:

1. 01-01-15
2. 07-01-15
3. 12-31-15
4. 01-01-16

Answer 1

Given data

given that the On 01-01-15,B issued $3000,000 of 3.5%, 5years term bond

then the bond pay the interest every july 1 and january 1

given that at the time B issued the bonds, similar bonds paid 3% upon issuing the bonds ,B incurred and and paid $27,000 of bond issuance costs

A.
3.5%Bond A/c Dr $600000
To Cash/Bank A/c $600000
(Being Bond Issue)

B.
Interest Exp. A/c Dr $21,000
To Cash/Bank A/c $21,000
(Being Interest Paid)

C.
No Entries

D.
Interest Exp. A/c Dr $21,000
To Cash/Bank A/c $21000
(Being Interest Paid)