Duval Co. issues four-year bonds with a $100,000 par value on June 1, 2015, at a price of $95,948. The annual contract rate is 7%, and interest is paid semiannually on November 30 and May 31. 1.)Prepare journal entries to record the first interest payment, accrued interest as of December 31, 2015 and to record the second interest payment
Answer:
| Date | Description | Debit | Credit |
| 30-Nov | Interest Expanses | 3500 | |
| Cash | 3500 | ||
| (Being interest for the period June01 to Nov30 become due and paid on Nov-30) |
|||
| 31-Dec | Interest Expanses | 583.33 | |
| Interest Payable | 583.33 | ||
| (Being Entry for accrued interest for December) |
|||
| 31-May | Interest Expanses | 2916.67 | |
| Interest Payable | 583.33 | ||
| To cash | 3500 |
Working notes
1
Interest Expanses
=1000,000*7%*6/13
=$ 3500
2
Interest due on Dec-31
=3500*1/6
=583.33
