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On January 1, 2020, Klosterman Company issued $500,000, 10%, 10-year bonds at face value. Interest is payable annually on January 1. (a) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 (b) Prepare the journal entry to record the accrual of interest on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31 (c) Prepare the journal entry to record the payment of interest on January 1, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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abiolataiwo2015

Answer and Explanation:

Journal entry to record the issuance of the bonds.

A.

Jan 1

Dr cash $500,000

Cr bonds payable $500,000

B. Journal entry to record the accrual of the interest

Dec 31 2020

Dr Interest expense $25,000

Cr Interest Payable $25,000

C. Journal entry to record the payment of interest on January 1, 2021.

Dr Interest expense $25,000

Cr Cash $25,0000

Interest expense $500,000×10%×1/2=$25,000
  • The journal entries are as follows:

(a) On Jan 1, 2020

Cash $500,000

       To Bonds payable $500,000

(Being the issuance of the bond is recorded)  

(b) On Dec 31 2020

Interest expense $50,000 (10% of $500,000)

      To Interest Payable $50,000

(Being the accrual of interest is recorded)

(c) On Jan 1, 2021

Interest expense $50,000

    To Cash $50,000

(Being the payment of interest is recorded)

Learn more: brainly.com/question/6201432

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