Answer:
- Brussels Enterprises issues bonds at par dated January 1, 2019
Debit $3,200,000 Cash
Credit $3,200,000 Bonds Payable
- Interest semiannually on June 30
Debit $144,000 Bond Interest Expense
Credit $144,000 Cash
- Interest semiannually on December 31
Debit $144,000 Bond Interest Expense
Credit $144,000 Cash
- Record the entry for the maturity of the bonds on December 31, 2022
Debit $3,200,000 Bonds Payable
Credit $144,000 Bond Interest Expense
Credit $3,344,000 Cash
Explanation:
At the moment of the company receive the money for the bonds issued, the company record the following journal entry:
Debit $3,200,000 Cash
Credit $3,200,000 Bonds Payable
Recognizing the money that the company get and the liabilities for the years to come on the Long Term Liabilities in the balance sheet, becuase it matures in 4 years.
- When the company begins to pay the interest the company records the following entry:
Debit $144,000 Bond Interest Expense
Credit $144,000 Cash
The company recognizes the interest payment at each moment it occurs as expenses in the Income Statement.
At the maturity of the bonds the company reverse the entry made at the beginning when it receives the money and recognize the liabilities.
Now the journal entry is as follows:
Debit $3,200,000 Bonds Payable
Credit $144,000 Bond Interest Expense
Credit $3,344,000 Cash
