Urgent Accounting Test Problem 2?

B

Ben

New member
I have a test problem due Wednesday, Dec 2 at 12:00pm eastern time. Please help me if you can. Thanks.

On July 1, 2009, the Pluto Press Company issued $200,000, 6%, 5-year life, dated April 1, 2009 (three months after the stated issue date) at par. How much cash was received on July 1, 2009 when Pluto finally issued the bonds, three months late? What is the interest expense recorded for the first interest period. Show all work with calculations.
 
Assuming interest is paid semi-annually,

Dr Cash $203,000
Cr Bond payable $200,000
Cr Interest payable $3,000 ($200,000 x 6% x 3/12)

1st interest payment date:
Dr Interest expense $3,000
Dr Interest payable $3,000
Cr Cash $6,000 ($200,000 x 6% x 6/12)

So the interest expense recorded for the first interest period is $3,000

Pls refer to attached lecture page 135
 
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