Question

1. What generic journal entry does the issuer make to record the interest it pays semiannually?

a. debits bond interest expense and credits cash

b. debits bonds payable and credits cash

c. debits cash and credits bond interest expense

d. debits cash and credits bonds payable.

2. a company issues $1,000, 8%, 2-year bonds at par values. Interest is payable semiannually. What journal entry does the issuer makes to record the maturity of these bonds?

a. debits bonds payable for $1,000 and credits cash for $1,000.

b. debits bonds payable for $1,080; credits premium on bonds payable for $80; and credits cash for $1,000.

c. debits cash for $920 and credits bonds payable for $920

d. debits cash for $1,000 and credits bonds payable for $1,000

Answer 1

1)

The journal entry for interest payment is debits bond interest expense and credits cash.

Option a.

2)

The bonds are issued at par. At maturity the bond will be repaid by paying $1,000

Debits bonds payable for $1,000 and credits cash for $1,000.

Option a.