A2 Chapter 12: Accounting for Bonds

On September 10, Dewey Corporation paid $15,000 cash to a bond trustee for the annual interest on a bond issue. The correct transaction to record paying interest on this bond is:

• debit Cash, $15,000; credit Bond Payable, $15,000.
• debit Bond Payable, $15,000; credit Cash, $15,000.
• debit Interest Expense, $15,000; credit Cash, $15,000.
• debit Cash, $15,000; credit Interest Expense, $15,000.

On July 9, Action Footwear paid cash to a bond trustee for the annual deposit to a bond sinking fund for $10,000. The correct entry to record this transaction is:

• debit Interest Bond, $1,000; credit Cash, $1,000.
• debit Cash, $10,000; credit Bond Sinking Fund, $10,000.
• debit Interest Expense, $10,000; credit Cash, $10,000.
• debit Bond Sinking Fund, $10,000; credit Cash, $10,000.

On December 15, Jones Corporation paid cash to a bond trustee for the annual interest on a bond issue for $1,200. The correct transaction to record paying interest on a bond is:

• debit Cash, $1,200; credit Bond Payable, $1,200.
• debit Bond Payable, $1,200; credit Cash, $1,200.
• debit Cash, $1,200; credit Interest Expense, $1,200.
• debit Interest Expense, $1,200; credit Cash, $1,200.

On May 20, Dixie Company paid cash to the bond trustee for the annual deposit to the bond sinking fund, $30,000, and recorded interest earned on the bond sinking fund, $2,000. The correct way to record this transaction is:

• debit Cash, $30,000, Interest Income, $2,000; credit Bond Sinking Fund, $32,000.
• debit Bond Sinking Fund, $32,000; credit Cash, $30,000, Interest Income, $2,000.
• debit Bond Payable, $32,000; credit Bond Sinking Fund, $32,000.
• debit Bond Sinking Fund, $32,000; credit Bond Payable, $32,000.

On October 15, Davis Corporation received cash for the face value of a two-year, 12% bond issued for $10,000. The correct entry to record the issuance of the bond is:

• debit Bonds Payable, $1,200; credit Cash, $1,200.
• debit Cash, $1,200; credit Bonds Payable, $1,200.
• debit Bonds Payable, $10,000; credit Cash, $10,000.
• debit Cash, $10,000; credit Bonds Payable, $10,000.

On September 15, Billy Bob's Corporation received cash for the face value of a five-year, 15% bond issued for $20,000. The correct entry to record issuing this bond is:

• debit Cash, $20,000; credit Bonds Payable, $20,000.
• debit Bonds Payable, $20,000; credit Cash, $20,000.
• debit Bonds Payable, $2,000; credit Cash, $2,000.
• debit Cash, $2,000; credit Cash, $2,000.

On March 11, Huggins Corporation paid cash to a bond trustee for the annual deposit to the bond sinking fund for $38,000 and recorded interest earned on the bond sinking fund for $2,000. The correct entry to record this transaction is:

• debit Bond Payable, $40,000; credit Bond Sinking Fund, $40,000.
• debit Bond Sinking Fund, $40,000; credit Bond Payable, $40,000.
• debit Bond Sinking Fund, $40,000; credit Cash, $38,000, Interest Income, $2,000.
• debit Cash, $38,000, Interest Income, $2,000; credit Bond Sinking Fund, $40,000.

On February 14, Steffi Wallace subscribed for 2,000 shares of Barefoot Barn Corporation's common stock at $12 per share. She agreed to pay $12,000 on May 14 and $12,000 on August 14. What is the correct journal entry for receiving a stock subscription from Steffi Wallace for 2,000 shares of $12 stated value common stock, $24,000, on February 14?

• debit Subscriptions Receivable, $24,000; credit Stock Subscribed-Common, $24,000
• debit Stock Subscribed-Common, $24,000; credit Subscriptions Receivable-Common, $24,000
• debit Stock Subscribed-Common, $24,000; credit Cash, $24,000
• debit Cash, $24,000; credit Stock Subscribed-Common, $24,000

On March 4, Sadie Morgan subscribed for 4,000 shares of BeanBaggie Corporation's common stock at $10 per share. She agreed to pay $20,000 on June 4 and $20,000 on September 4. The correct journal entry for issuing Stock Certificate No. 10 to Sadie Morgan for $4,000 shares of $10 stated value common stock on September 4 for issuance of stock previously subscribed is:

• debit Stock Subscribed-Common, $40,000; credit Capital Stock-Common, $40,000.
• debit Capital Stock-Common, $40,000; credit Stock Subscribed-Common, $40,000.
• debit Cash, $20,000; credit Stock Subscribed-Common, $20,000.
• debit Stock Subscribed-Common, $20,000; credit Cash, $20,000.

On March 4, Sadie Morgan subscribed for 4,000 shares of BeanBaggie Corporation's common stock at $10 per share. She agreed to pay $20,000 on June 4 and $20,000 on September 4. What is the correct journal entry for receiving cash from Sadie Morgan in payment of stock subscription, $20,000, on June 4?

• debit Stock Subscribed-Common, $20,000; credit Subscriptions Receivable, $20,000
• debit Subscriptions Receivable, $20,000; credit Stock Subscribed-Common, $20,000
• debit Cash, $20,000; credit Subscriptions Receivable, $20,000
• debit Subscriptions Receivable, $20,000; credit Cash, $20,000