Questions: Issuing bonds at face amount On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a 300,000, 4%, 10-year bond that pays semiannual interest of 6,000 (300,000 x 4% x 1/2 year), receiving cash of 300,000. a. Journalize the entry to record the issuance of the bonds. If an amount box does not require an entry, leave it blank. Cash ✔ Bonds Payable ✔ Feedthack Check My Work Bonds payable is always recorded at face value. b. Journalize the entry to record the first interest payment on June 30. If an amount box does not require an entry, leave it blank. Cash Feedtack

Issuing bonds at face amount

On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a 300,000, 4%, 10-year bond that pays semiannual interest of 6,000 (300,000 x 4% x 1/2 year), receiving cash of 300,000.
a. Journalize the entry to record the issuance of the bonds. If an amount box does not require an entry, leave it blank.

Cash ✔
Bonds Payable ✔

Feedthack

Check My Work
Bonds payable is always recorded at face value.
b. Journalize the entry to record the first interest payment on June 30. If an amount box does not require an entry, leave it blank.

Cash

Feedtack

Transcript text: Issuing bonds at face amount On January 1, the first day of the fiscal year, Designer Fabric Inc. issues a $\$ 300,000,4 \%, 10$-year bond that pays semiannual interest of $\$ 6,000$ ( $\$ 300,000 \times 4 \% \times 1 / 2$ year), receiving cash of $\$ 300,000$. a. Journalize the entry to record the issuance of the bonds. If an amount box does not require an entry, leave it blank. Cash $\checkmark$ Bonds Payable $\checkmark$ $\square$ $\square$ $\square$ $\square$ Feedthack Check My Work Bonds payable is always recorded at face value. b. Journalize the entry to record the first interest payment on June 30. If an amount box does not require an entry, leave it blank. $\qquad$ $\square$ $\square$ Cash $\square$ $\square$ Feedtack

Solution

To address the question, we need to journalize the entries for the issuance of bonds and the first interest payment. Let's break it down step by step:

a. Journalize the entry to record the issuance of the bonds.

On January 1, Designer Fabric Inc. issues a $300,000 bond at face value. The journal entry to record the issuance of the bonds is as follows:

Debit: Cash $300,000
Credit: Bonds Payable $300,000

This entry reflects that the company received cash of $300,000 and has a liability of $300,000 in the form of bonds payable.

b. Journalize the entry to record the first interest payment on June 30.

The bond pays semiannual interest of $6,000. On June 30, the company needs to record the interest payment. The journal entry is:

Debit: Interest Expense $6,000
Credit: Cash $6,000

This entry reflects the payment of interest, which is an expense for the company, and the outflow of cash.

Summary

For the issuance of the bonds, the entry is:
- Debit Cash $300,000
- Credit Bonds Payable $300,000
For the first interest payment, the entry is:
- Debit Interest Expense $6,000
- Credit Cash $6,000

These entries accurately reflect the financial transactions related to the bond issuance and the subsequent interest payment.

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