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Issuance of bonds and payment of interest

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On March 1, Year 1, a firm issues $475,000 bonds at par value plus accrued interest. The stated rate on the bonds was 12% and the bonds pay interest semi-annually on June 30 and December 31. Prepare the entries necessary to record

a. the issuance of the bonds on March 1, Year 1
b. the payment of interest on June 30, Year 1
c. the payment of interest on December 31, Year 1

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Solution Summary

The solution explains the journal entries relating to issuance of bonds and payment of interest.

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a. the issuance of the bonds on March 1, Year 1

When bonds are issued with accrued interest, the interest payable account is credited since this interest would be paid on the interest payment date. The bonds are dated Jan 1 (interest is paid on June ...

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