Answer:
a.
January 1, 2022
Cash $1100000 Dr
Bonds Payable $1100000 Cr
b.
December 31, 2022
Interest expense $66000 Dr
Interest Payable $66000 Cr
c.
January 1, 2023
Interest Payable $66000 Dr
Cash $66000 Cr
Explanation:
a.
The bonds are issued at face value. The face value of each bond is $1000 and there are 1100 bonds issued in total. Thus, the cash received from issuance of bonds is,
Cash = 1100 * 1000 = $1100000
So, we debit the cash by this amount and credit the bonds payable account.
b.
The interest expense for the year on these bonds is,
1100000 * 0.06 = $66000
The adjusting entry made on December 31 2022 will include a debit to the interest expense and a credit to the interest payable. The interest expense will be debited because under the accrual principle, we match the expenses to the period to which they relate.
c.
The entry to record payment of interest will result in a debit to interest payable as liability is being closed through this payment and a credit to cash
Based on the information given the appropriate journal entries to record the transactions are:
Blue Spruce Corp. Journal entries
a. January 1, 2022
Debit Cash $1,100,000
(1,100 x $1000)
Credit Bonds payable $1,100,000
(To record sale of bonds)
b. December 31,2022
Debit Interest expense $66,000
Credit Interest payable $66,000
($1,100,000×6%)
(To record interest expense)
c. January 1, 2022
Debit Interest payable $66,000
Credit Cash $66,000
($1,100,000×6%)
(To record interest paid)
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