Accounting journalizing and adjusting

Fall 2013

Group Exercise #4

Sapienti Co. sells $400,000 of 12% bonds on June 1, 2014, the contract date. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2018. The bonds yield 10%. After the second interest payment, Sapienti buys back the bonds when the market interest rate is 8%.

Required:

1. Record the journal entry for the issuance of the bond.

2. Record the journal entry for the first interest payment.

3. Record the journal entry on December 31, 2014.

4. Record the journal entry for the second interest payment.

5. Record the journal entry for the buy back of the bonds.