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Journal Entries for Bonds at Par

Lesson
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There are three basic transactions that involve bonds:

  • Issuing a bond
  • Paying the interest on the bond (often yearly)
  • Retiring the bond

This module will let you practice each of the above on a bond sold at face value.

Question
The CEO just ran into your office with an urgent accounting question.
What is the journal entry for making an interest payment on the bond?
Answer
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👉 Answer:

  • Interest Expense     $2,720.00    
         Cash     $2,720.00    

👩‍🎓 Here are the steps to figure it out:

  1. First, remember the formula for period interest expense.
    PAYMENT = BOND FACE VALUE * INTEREST RATE
  2. Then plug in the numbers.
    $2,720.00 = $34,000 * 8%
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