The board of directors of Farrell Communications Ltd. authorizes the issuance of 6-percent, 20-year bonds with a

Question:

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 semiannual interest dates are March 31 and September 30. The bonds are issued through an underwriter on April 30, 2014, 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, 2014.

b. Payment of interest on September 30, 2014.

c. Accrual of interest on December 31, 2014.

d. Payment of interest on March 31, 2015.

2. Report interest payable and bonds payable as they would appear on the Farrell Communications Ltd. balance sheet at December 31, 2014.

3. Why do we need to accrue interest on April 30 and again on December 31, twice in 2014?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...