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Untitled Document41 - 2 12 for two months On December 31...

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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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This note was uploaded on 12/25/2011 for the course FIN 3312 taught by Professor Staff during the Spring '08 term at Texas State.

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Untitled Document41 - 2 12 for two months On December 31...

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