Question

E14-3 (L01) (Entries for Bond Transactions) Presented below are two independent situations 1. On January 1, 2017, Simon Company issued $200,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April, July 1, October 1, and January 1. 2. On June 1, 2017, Garfunkel Company issued $100,000 of 12%, 10-vear bonds dated January 1 at par plus accrued interest. Interest is payable semiannually on July 1 and January 1. Instructions For each of these two independent situations, prepare journal entries to record the following (a) The issuance of the bonds. old do (b) The payment of interest on July 1. (c) The accrual of interest on December 31.

Answer 1

Simon Company
Date	Account Titles and Explanation	Debit	Credit
1/1/2017	Cash	$200,000
	Bond Payable		$200,000
7/1/2017	Interest Expense	$4,500
	Cash (200000*9%*3/12)		$4,500
12/31/2017	Interest Expense	$4,500
	Interest Payable		$4,500
Garfunkle Company
Date	Account Titles and Explanation	Debit	Credit
6/1/2017	Cash	$105,000
	Bond Payable		$100,000
	Interest Expense (100000*12%*5/12)		$5,000
7/1/2017	Interest Expense	$6,000
	Cash (100000*12%*6/12		$6,000
12/31/2017	Interest Expense	$6,000
	Interest Payable		$6,000