Powell Company issued a $1,200,000, 7 %, 10-year bond payable at face value on January 1, 2018. Interest is paid semiannually on January 1 and July 1. Requirements
1. Journalize the issuance of the bond payable on January 1, 2018.
2. Journalize the payment of semiannual interest on July 1, 2018.

1.Dr Cash 1,200,000

Cr Bonds Payable 1,200,000

2. Dr Interest Expense 42,000

Cr Cash 42,000

Explanation:

1. Preparation of the Journal entry to record the issuance of the bond payable on January 1, 2018.

Since the company issued the amount of $1,200,000 this means that the transaction will be recorded as:

January 1 2018

Dr Cash 1,200,000

Cr Bonds Payable 1,200,000

( To record Issued bonds at par)

2. Preparation of the Journal entry to record the payment of semiannual interest on July 1, 2018.

Since the company issued the amount of $1,200,000 with 7 %, and 10-year bond payable at face value, this means the transaction will be recorded as;

July 1 2018

Dr Interest Expense 42,000

Cr Cash 42,000

($1,200,000 × 0.07 × 6/12)

(To record paid semiannual interest payment)

answer; the correct answer is (direct foreign investment);