During two consecutive years, the Weelen Ereight Corporation P.O. 1,2,3 completed the following transactions related to its $12,000,000 issue of 25-year, 8 percent bonds, dated May 1 of the first year. Interest is payable on May 1 and November 1. The corporation’s fiscal year extends from January 1 through December 31.

Instructions 1. Record the transactions in general journal form.
2. Post the entries to the Interest Expense account and the Discount on Bonds Payable account. Label the adjusting, closing, and reversing entries.

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Year 1 May 1 Nov. 1 Paid semiannual interest on bonds. Dec. 31 31 Sold bond issue at 98%. Deposited $173,250 in a bond sinking fund. Made adjusting entry to record accrued interest payable. 31 Made adjusting entry to record amortization of bond discount. Closed Interest Expense account. 31 Year 2 Jan. 1 9 May 1 Nov. 1 Dec. 31 Reversed adjusting entry for accrued interest payable. Bought various securities with sinking fund cash; cost, $168,600. Paid semiannual interest on bonds. Paid semiannual interest on bonds. Recorded receipt of $12,994 of income derived from sinking fund investments, depositing cash in sinking fund. 31 Deposited $258,000 in bond sinking fund. 31 Made adjusting entry to record accrued interest payable. 31 Made adjusting entry to record amortization of bond discount. 31 Closed the Sinking Fund Income account. 31 Closed Interest Expense account.