Bonds Issued at Par - Basic Concepts

question 171

Essay

Bonds issued at par - basic concepts
On 1 April, Year 1, Olsen Products, Inc. issued at par $25 million of 10%, 10-year bonds payable. Interest is payable semiannually each 1 April and 1 October.
(a) What is the amount of cash paid to bondholders for interest during year 1?
$_______________
(b) Give the adjusting entry necessary at 31 December, 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' statement of financial position at 31 December, 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 1 April, Year 2, to record the semiannual payment of interest to bondholders.

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