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    william407's Avatar
    william407 Posts: 1, Reputation: 1
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    #1

    Nov 1, 2009, 06:58 PM
    Journal Entries
    I am having trouble with the following question and entering it into an accounting journal.

    But here is what I have so far...
    Dr 200,000 Cash
    Cr 200,000 Bonds


    Crockett Corporation issued $200,000 of its 10 percent bonds payable on April 1, 2007. The bonds were issued at face value. Interest is payable semi-annually, on October 1 and April 1. Give the journal entries to issue the bonds and pay each of the first two interest payments to bondholders.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Nov 2, 2009, 12:14 AM

    The first entry is close. It's Bonds Payable. If you do not put the word "payable" on it, it makes it look like an asset instead of a liability.

    As for interest, do you know how to figure out interest for six months? It's just an expense, paid with cash. How would you record any other cash expense?

    As for the second payment, that's a little unclear. Technically you should accrue the interest at the end of the year, but they have not mentioned making that entry. But they also might not be on a calendar year - there isn't any information indicating this.

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