[G3]

I’ll admit the bonds section of the FAR exam has always been a problem for me. So, when I was going over the Notes I got confused when it came to the journal entry for issuance between interest dates.

On the one page the entry said the accrued interest was credited to “Interest Payable” but the next page it was a credit to “Interet Expense” specifically mentioning that we credit the expense.

I checked my other review material but it just showed “Interest Expense (Interest Payable)” as part of the entry

I am confused; is it a credit to Payable or Expense?

Any help would be greatly appreciated 🙂

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[Gatorbates]

Any accrual for interest expense is always a liability (payable). Very rare that you would ever credit an expense.

Licensed Florida CPA:
B: 71, 73, 79
A: 83
R: 78 (expired), 77
F: 74, 74, 80

It's finally freaking over.

[Gatorbates]

Any accrual for interest expense is always a liability (payable). Very rare that you would ever credit an expense.

Licensed Florida CPA:
B: 71, 73, 79
A: 83
R: 78 (expired), 77
F: 74, 74, 80

It's finally freaking over.

[G3]

@ Gatorbates

That's what I thought based on the solutions to MCQs but that part of the Ninja notes really confused me!

I'm still not sure why that entry credited the “Interest Expense” account instead on the Interest Payable account (especially since the expense account is used when multiplying the bond CV by the Yield Rate)

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[G3]

@ Gatorbates

That's what I thought based on the solutions to MCQs but that part of the Ninja notes really confused me!

I'm still not sure why that entry credited the “Interest Expense” account instead on the Interest Payable account (especially since the expense account is used when multiplying the bond CV by the Yield Rate)

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[G3]

Anyone using the FAR Notes? Can anyone explain why that entry credited the “Interest Expense” account instead on the Interest Payable account? It's still confusing me 🙁

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[G3]

Anyone using the FAR Notes? Can anyone explain why that entry credited the “Interest Expense” account instead on the Interest Payable account? It's still confusing me 🙁

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[jeff]

Sorry for the confusion…there are 2 ways to make the entry and I switched between them without making it clear.

#1:

Bond Issuance:

Dr. Cash

Cr. Bond Payable

Cr. Interest Expense (2 months)

Interest Payment:

Dr. Interest Expense (6 months)

Cr. Cash

#2:

Bond Issuance:

Dr. Cash

Cr. Bond Payable

Cr. Interest Payable (2 months)

Interest Payment:

Dr. Interest Payable (2 months)

Dr. Interest Expense (4 months)

Cr. Cash

I'm writing this at 11pm on a Saturday so I hope I made sense 🙂

Jeff

[jeff]

Sorry for the confusion…there are 2 ways to make the entry and I switched between them without making it clear.

#1:

Bond Issuance:

Dr. Cash

Cr. Bond Payable

Cr. Interest Expense (2 months)

Interest Payment:

Dr. Interest Expense (6 months)

Cr. Cash

#2:

Bond Issuance:

Dr. Cash

Cr. Bond Payable

Cr. Interest Payable (2 months)

Interest Payment:

Dr. Interest Payable (2 months)

Dr. Interest Expense (4 months)

Cr. Cash

I'm writing this at 11pm on a Saturday so I hope I made sense 🙂

Jeff

[Tncincy]

Not my post, but appreciate the clarity :-))

Added this to my notes so I won't be confused when I get to this part.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Tncincy]

Not my post, but appreciate the clarity :-))

Added this to my notes so I won't be confused when I get to this part.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[G3]

Thanks Jeff. That clears things up. Is there any special rules when to use each entry form?

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[G3]

Thanks Jeff. That clears things up. Is there any special rules when to use each entry form?

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[G3]

Making final notes for my FAR exam next week. Is there any special rules about when to use each form of entry?

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[G3]

Making final notes for my FAR exam next week. Is there any special rules about when to use each form of entry?

3XBEC:75 * 4XREG:82 * 4XFAR:76 * 7XAUD:77

“It is hard to fail, but it is worse never to have tried to succeed.” Theodore Roosevelt

[jeff]

No – no special rules that you need to worry about for your exam.

The key nugget was the credit to Interest Expense – that's it.

[Author]

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