Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued $450,000 of 10-year, 8% bonds on May 1 of the current year at face value, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.
-May 1 Issued the bonds for cash at their face amount.
-Nov. 1 Paid the interest on the bonds.
-Dec. 31 Recorded accrued interest for two months.
Journalize the entries to record the above selected transactions for the current year. Round your answers to whole number.
Issuance of Bonds at Face Value:
When bonds are issued at par, it is easy to calculate the interest expense as there is no involvement of amortization, which is the case when bonds are issued at discount or premium. When the interest expense is paid, the expense is debited and cash is credited and when the interest expense is accrued, we credit interest payable instead of cash.
Answer and Explanation: 1
Journal entries in the books of Thomson Co. are made below:
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fromChapter 10 / Lesson 10
Explore premium bonds and discount bonds. Learn what premium bonds are and understand the differences between premium and discount bonds through examples.