Question

On February 1, 2021, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000. The bonds sold for $731,364 and mature on January 31, 2041 (20 years). The market yield for bonds of similar risk and maturity was 10%. Interest is paid semiannually on July 31 and January 31. Strauss-Lombardi's fiscal year ends December 31. Required: 1. to 4. Prepare the journal entries to record their issuance by Strauss-Lombardi on February 1, 2021, interest on July 31, 2021 (at the effective rate), adjusting entry to accrue interest on December 31, 2021 and interest on January 31, 2022. (Do not round your intermediate calculations. Round your final answers to nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Tournal Entries credits 1-2-2021 800,000 rate General Tournal Debit ($) Cash(price given) 731,364 Discount on Bonds 68,636 payable Bonds payable face Amount) (To Record the issuance of the Bond on Feb. 1-2021) 31-7-2021 Interest Expense 36,568 (731,364 x 10 %. x) Discount on Bonds payable Difference) Cash (800,000 x 9 x++) to record the Interest paid) 31-12-2021 Interest Expense 30,497 (731364 +568) x10 % x=x) Discount on Bonds payable (Difference) Interest Payable ( (800000 x 9% x£x ) (to record the accrued interest) 568 36,000 497 30,000

- 31-1-2022 Interest Expense van 6100 16231,364+568) X10%, 87 x Interest payable 30,000) g 100 Discount on Bonds payable Difference) Cash (800000 x 94 x to record interest paid) 36,000 - -

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