Cash flows related to a bond include the receipt of cash when the bond is issued, payment of interest each period, and repayment of the bond at maturity. A journal entry must be made for each of these transactions.

Scenario #1

XYZ Corporation issued $900,000 of 10 year, 7% bonds on May 1 of the current year at face value, with interest payable semi-annually on May 1 and November 1. Journalize the entries to record the following transactions:

Issued the bonds for cash at their face amount on May 1

Paid the first semi-annual interest on the bonds on November 1

Retired the bonds at the end of 10 years

Scenario #2

XYZ Corporation issued $10,000,000 of 5 year, 7% bonds on May 1 of the current year at face value, with interest payable semi-annually on May 1 and November 1. The bonds were issued at a market interest rate of 8%, resulting in XYZ Corporation receiving cash of $9,594,415. Journalize the entries to record the following transactions:

Issuance of the bonds on May 1

Paid the first semi-annual interest on the bonds on November 1

Scenario #3

XYZ Corporation issued $20,000,000 of 5 year, 9% bonds on April 1 of the current year at face value, with interest payable semi-annually on April 1 and October 1. The bonds were issued at a market interest rate of 8%, resulting in XYZ Corporation receiving cash of $20,811,020. Journalize the entries to record the following transactions:

Issuance of the bonds on April 1

Paid the first semi-annual interest on the bonds on October 1

Scenario \#1 May 1 Nov 1 May 1 Scenario \#2 May 1 Nov 1 Scenario \#3 \begin{tabular}{l|l} Apr & 1 \end{tabular} Oct 1