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Gabriel Co. produces and distributes semiconductors for use by computer manufacturers. Gabriel Co. issued $1,200,000 of 10-year, 12% 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.
Journalize the entries to record the following selected transactions for the current 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.
Expert Answer
May 1:
Bank A/c Dr. $ 1,200,000
To Bonds Payable A/c $ 1,200,000
Nov. 1
Interest Expense A/c Dr. ( 1,200,000* 12% *6/12) $ 72,000
To Bank A/c $ 72,000
Dec. 31
Interest Expenses A/c Dr. ( 1,200,000* 12% *2/12) $ 24,000
To Interest Payable A/c $24,000
