On April 1, 2003, Tatum Corporation issued $900,000 of 4-year, 8% bonds at face value plus accrued interest. The bonds were dated February 1, 2003, and pay interest semiannually on August 1 and February 1.
Prepare all entries relating to the bond issue from the date of sale through the year end on December 31, 2003, including any adjusting entries. You may omit journal entry explanations but you should show all computations.
The bonds are issued on April 1 but dated Feb 1. The accrued interest is for 2 months. The interest amount is 900,000X8%X2/12 = 12,000. When the bonds are issued the total cash which is raised will be 900,000+12,000=912,000. This cash is for interest and would be paid back ...
The solution explains the journal entries related to bond issue.