Answered

Brussels Enterprises issues bonds at par dated January 1, 2021, that have a [tex]$\$[/tex]3,400,000[tex]$ par value, mature in four years, and pay $[/tex]9\%$ interest semiannually on June 30 and December 31.

1. Record the entry for the issuance of bonds for cash on January 1.
2. Record the entry for the first semiannual interest payment.
3. Record the entry for the second semiannual interest payment.
4. Record the entry for the maturity of the bonds on December 31, 2024 (assume semiannual interest is already recorded).

Transaction List

Journal Entry Worksheet

1. Record the issuance of bonds for cash on January 1.

Note: Enter debits before credits.

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Answer :

GinnyAnswer
Let's address each of the three parts of the question in a detailed manner.

### 1. Record the entry for the issuance of bonds for cash on January 1
At the time of issuance, the bonds are issued at par value. Therefore, the company receives cash equivalent to the par value of the bonds and records a corresponding bond payable.

Journal Entry:
- Debit: Cash = \[tex]$3,400,000 - Credit: Bonds Payable = \$[/tex]3,400,000

Entry:
```
Date: January 1, 2021
----------------------------------------
| Debit | Account | Amount |
----------------------------------------
| | Cash | 3,400,000 |
----------------------------------------
| Credit| Bonds Payable | 3,400,000 |
----------------------------------------
```

### 2. Record the entry for the first semiannual interest payment and the second semiannual interest payment
Given that the interest rate is 9% annually and interest is paid semiannually, the semiannual interest payment is calculated as follows:

Semiannual Interest Payment = (Par Value of Bonds) × (Semiannual Interest Rate)
Semiannual Interest Rate = Annual Interest Rate / 2 = 9% / 2 = 4.5%
Semiannual Interest Payment = \[tex]$3,400,000 × 4.5% = \$[/tex]153,000

Journal Entry for First Semiannual Interest Payment:
- Debit: Interest Expense = \[tex]$153,000 - Credit: Cash = \$[/tex]153,000

Entry:
```
Date: June 30, 2021
----------------------------------------
| Debit | Account | Amount |
----------------------------------------
| | Interest Expense | 153,000 |
----------------------------------------
| Credit| Cash | 153,000 |
----------------------------------------
```

Journal Entry for Second Semiannual Interest Payment:
- Debit: Interest Expense = \[tex]$153,000 - Credit: Cash = \$[/tex]153,000

Entry:
```
Date: December 31, 2021
----------------------------------------
| Debit | Account | Amount |
----------------------------------------
| | Interest Expense | 153,000 |
----------------------------------------
| Credit| Cash | 153,000 |
----------------------------------------
```

### 3. Record the entry for the maturity of the bonds on December 31, 2024
At maturity, the bonds payable are settled, and the cash paid back to the bondholders is equivalent to the par value of the bonds.

Journal Entry:
- Debit: Bonds Payable = \[tex]$3,400,000 - Credit: Cash = \$[/tex]3,400,000

Entry:
```
Date: December 31, 2024
----------------------------------------
| Debit | Account | Amount |
----------------------------------------
| | Bonds Payable | 3,400,000 |
----------------------------------------
| Credit| Cash | 3,400,000 |
----------------------------------------
```

### Summary of Journal Entries:
1. Issuance of Bonds on January 1, 2021
- Debit: Cash = \[tex]$3,400,000 - Credit: Bonds Payable = \$[/tex]3,400,000

2. First Semiannual Interest Payment (June 30, 2021)
- Debit: Interest Expense = \[tex]$153,000 - Credit: Cash = \$[/tex]153,000

3. Second Semiannual Interest Payment (December 31, 2021)
- Debit: Interest Expense = \[tex]$153,000 - Credit: Cash = \$[/tex]153,000

4. Maturity of the Bonds on December 31, 2024
- Debit: Bonds Payable = \[tex]$3,400,000 - Credit: Cash = \$[/tex]3,400,000

These entries ensure that the issuance, regular interest payments, and maturity payout are correctly recorded in the financial statements.