On the date of record 100 000 shared of preferred stock were outstanding. Declared a quarterly dividend of 0 50 per share on common stock and 1 00 per share on preferred stock. Issued 500 000 of 10 year 5 bonds at 104 with interest payable semiannually.
Accounting q a library how to journal. The journal entries for the year 2020 are. The entries for 2019 including the entry to record the bond issuance are shown next.
In our example there is no accrued interest at the issue date of the bonds and at the end of each accounting year because the bonds pay interest on june 30 and december 31. The account premium on bonds payable is a liability account that will always appear on the balance sheet with the account bonds payable. The corporation s journal entry to record the issuance of the bond on january 1 2019 will be.
Let s assume that this 9 bond being issued in an 8 market will sell for 104 100 plus 0 accrued interest. The credit is to bonds payable for 100 000 87 590 12 410. The journal entry to record this transaction is to debit cash for 87 590 and debit discount on bonds payable for 12 410.
The present value of the interest payments is 21 717 7 000 x 3 10245. The present value of the bond is 65 873 100 000 x 65873. Continuing with the above example let s understand the journal entry of discount on bonds payable in the books of xyz inc.
Journal entry of discount on bond payable. Will issue its bond at an issue price of us 957 88 to compensate for the return on investment of the bondholders. Bond price 957 88.
Journalize issuance of bonds and the first semi annual payment.
Bond issue journal entry. For our example assume jan 1 carr issues 100 000 12 3 year bonds for a price of 95 1 2 or 95 50 with interest to be paid semi annually on june 30 and december 30 for cash. We know this is a discount because the price is less than 100. The entry to record the issue of the bond on january 1 would be. Journal entries for interest expense annual financial statements.
If a corporation that is planning to issue a bond dated january 1 2019 delays issuing the bond until february 1 the corporation will not have interest expense during january. If a corporation issues a bond on january 1 2019 and the bond has a date of january 1 2019 there will be no accrued interest on the bond when it is issued. If the investor pays the corporation the face amount of the bond the bond is said to have been issued at par or at 100 meaning 100 of the bond s face value plus any accrued interest. On 1 january 2001 codestreet inc.
Issued 100 000 100 face value bonds carrying a coupon rate of 8 payable semiannually. The term of the bonds is 20 years.
The term of the bonds is 20 years. Issued 100 000 100 face value bonds carrying a coupon rate of 8 payable semiannually. On 1 january 2001 codestreet inc.
If the investor pays the corporation the face amount of the bond the bond is said to have been issued at par or at 100 meaning 100 of the bond s face value plus any accrued interest. If a corporation issues a bond on january 1 2019 and the bond has a date of january 1 2019 there will be no accrued interest on the bond when it is issued. If a corporation that is planning to issue a bond dated january 1 2019 delays issuing the bond until february 1 the corporation will not have interest expense during january.
Journal entries for interest expense annual financial statements. The entry to record the issue of the bond on january 1 would be. We know this is a discount because the price is less than 100.
For our example assume jan 1 carr issues 100 000 12 3 year bonds for a price of 95 1 2 or 95 50 with interest to be paid semi annually on june 30 and december 30 for cash.
