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Untitled Document41 - 2 / 12 ) for two months. On December...

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Bonds issued between interest dates If a bond is sold at a time other than on its original issue date, the purchaser of  the bond pays the issuing company the price of the bond plus accrued interest  from the last interest payment date. This accrued interest is paid back to the  purchaser who receives six months of interest at the next semiannual interest  payment date. For example, if Lighting Process, Inc. issued $10,000 ten-year  10% bonds dated July 1, 20X0, on September 1, 20X0, the purchaser would pay  the $10,000 for the bonds and interest of $167 ($10,000 × 10%
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Unformatted text preview: 2 / 12 ) for two months. On December 31, the purchaser would receive a semiannual interest payment of $500 ($10,000 10% 6 / 12 ) as if the purchaser had owned the bonds for the entire six-month period. The entries for these two events would be: General Journal Date Account Title and Description Ref. Debit Credit 20X0 Sept. 1 Cash 10,167 Bonds Payable 10,000 Bond Interest Payable ($10,000 10% 2 / 12 ) 167 Issue $10,000 10% bonds dated 7/1 Dec. 31 Bond Interest Payable 167 Bond Interest Expense ($ 10,000 10% 4 / 12 ) 333 Cash 500 Pay semiannual interest...
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Untitled Document41 - 2 / 12 ) for two months. On December...

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