Question

Journalizing bond transactions

Power Company issued a $1,000,000, 5%, 5-year bond payable at face value on

January 1, 2018. Interest is paid semiannually on January 1 and July 1.

Requirements

1. Journalize the issuance of the bond payable on January 1, 2018.

2. Journalize the payment of semiannual interest on July 1, 2018.

Short answer

Answer:

The cash account is debited with $1,000,000, and the 5% bonds payable charge is

credited with $1,000,000.

Step-by-step solution

Definition of journal entry

Journal entry is the recording of the financial information by using the accountinglanguage.

Journal entry of the issue of bond

Date	Particulars	Debit	Credit
January 1, 2018	Cash	$1,000,000
	5% Bonds Payable		$1,000,000
	(Being Entry of the issue of bonds)