On April 1, 2013, Bond Corporation issued 8% debentures dated January 1, 2013. The debentures had a face value of $3,000,000 and interest was payable on January 1 and July 1. The debentures were sold at par plus accrued interest. To record this event on April 1, 2013, Everly should debit cash for

Question

Quizplus · Accepted Answer

Since the debentures were issued on April 1 but dated January 1, and interest is payable semi-annually on January 1 and July 1, there are 3 months of accrued interest by April 1. The annual interest is 8% of $3,000,000, which is $240,000. Three months of interest is 1/4 of that, or $60,000. Therefore, the debentures were sold for their face value ($3,000,000) plus the accrued interest ($60,000), totaling $3,060,000.

On April 1, 2013, Bond Corporation Issued 8% Debentures Dated