(Entries for Bond Transactions) Presented below are two independent situations. 1. On January 1, 2010, Divac Company...

Question:

(Entries for Bond Transactions) Presented below are two independent situations.

1. On January 1, 2010, Divac Company issued $300,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1.

2. On June 1, 2010, Verbitsky Company issued $200,000 of 12%, 10-year bonds dated January 1 at par plus accrued interest. Interest is payable semiannually on July 1 and January 1. For each of these two independent situations, prepare journal entries to record the following.

(a) The issuance of the bonds.

(b) The payment of interest on July 1.

Bonds
When companies need to raise money, issuing bonds is one way to do it. A bond functions as a loan between an investor and a corporation. The investor agrees to give the corporation a specific amount of money for a specific period of time in exchange...