The board of directors of Farrell Communications Ltd. authorizes the issuance of 6 percent, 20-year bonds with a maturity value of $10,000,000. The semi-annual interest dates are March 31 and September 30. The bonds are issued through an underwriter on April 30, 2020, at par plus accrued interest. Farrell’s year-end is December 31.

Required

1. Journalize the following transactions:

a. Issuance of the bonds on April 30, 2020.

b. Payment of interest on September 30, 2020.

c. Accrual of interest on December 31, 2020.

d. Payment of interest on March 31, 2021.

2. Report interest payable and bonds payable as they would appear on the Farrell Communications Ltd. balance sheet at December 31, 2020.

3. Why do we need to accrue interest on April 30 and again on December 31, twice in 2020?