Bonds Issued at Par - Basic Concepts

question 55

Essay

Bonds issued at par - basic concepts
On April 1,Year 1,Olsen Products,Inc.issued at par $25 million of 10%,10-year bonds payable.Interest is payable semiannually each April 1 and October 1.
(a)What is the amount of cash paid to bondholders for interest during Year 1?
$________
(b)Give the adjusting entry necessary at December 31,Year 1 (if any),regarding this bond issue.
(c)Interest expense on this bond issue reported in Olsen Products' Year 1 income statement is:
$________
(d)With respect to this bond issue,Olsen Products' balance sheet at December 31,Year 1,includes bonds payable of $________ and interest payable of $________ (indicate $0 or "none" if the item is not reported.
(e)Give the journal entry made by Olsen Products on April 1,Year 2,to record the semiannual payment of interest to bondholders.

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