Question no. 1

Axxo Corporation issued 5,000, 10%, 5-year, $1,000 bonds dated January 1, 2010, at 100 (i.e. at 100% of face or par value).

a. Prepare the journal entry to record the sale of these bonds on January 1, 2010.

b. Prepare the journal entry to record the first interest payment on July 1, 2010 (interest

payable semiannually), assuming no previous accrual of interest.

Prepare the adjusting journal entry on December 31, 2010, to record interest expense.