XYZ, Inc. issued 8% bonds: journal entries
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XYZ, Inc. issued 8% bonds with a face value of $100,000 on January 1 of the current year. The bonds come due in five years. Interest was to be paid annually on December 31st. At the time of issuance the market rate of interest was 6%.
(a) Make the journal entries to record the issuance of the bonds.
(b) Make the entry to record the payment of interest on December 31st, at the end of the first year.
(c) What is the book value (carrying value) of the bonds on January 1 after the interest payment in (b) above?
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This solution is in excel, attached, so go and click in cells to see computations. Instructional notes are added to assist you.
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