Bonds Issued at Par - Basic Concepts

question 55

Essay

Bonds issued at par - basic concepts
On 1 March, Year 1, Hubbard Co. issued at a price of 100 $20 million of 8%, 25-year bonds payable. Interest is payable semiannually each 1 March and 1 September.
(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 Hubbard's Year 1 income statement is:
$_______________
(d) With respect to this bond issue, Hubbard 's 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 Hubbard on 1 March, Year 2, to record the semiannual payment of interest to bondholders.

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