Casey issued bonds for $20,000 at 8% on June 1. What is the adjusting on December 31?

Question

Quizplus · Accepted Answer

The adjusting entry for bonds issued involves accruing interest expense for the portion of the bond term that has passed, since interest on bonds is typically paid semi-annually. Six months have passed between June 1 and December 31, so the adjusting entry would be to accrue six months worth of interest expense at the bond's interest rate. 
$20,000 x 8% x 6/12 = $800 in interest expense. 
The adjusting entry would be:
Interest expense $800 
Interest payable $800 
Choice B is the correct answer, as it matches this adjusting entry.

Casey Issued Bonds for $20,000 at 8% on June 1