[SubmergedSublime]

Hi there fellow crazies,

I have a question regarding FAR Sim 66.

For a bond issued at a premium, 6 month semi-annual payments…pretty vanilla. It asks for me to “Prepare the journal entry to record the payment of interest on June 30, Year 1:”

So I thought, “Okay. Each month you would have accrued the expense: so the answer is to DR Bonds Payable and CR Cash. Done”

But the expected answer was to CR Cash, but DR Bond Interest Expense and Premium on Bonds Payable. In essence, doing the entire expense for 6 months and skipping the monthly accruals.

I know I am overthinking at this stage, but is that the correct method? I had initially started to do just that, but then I changed course and did just the Cash/Payable entry when I re-read the question.

Now I am flummoxed.

Thanks!

[marqzho]

In theory, expense is incurred monthly/daily/ every hour/ every minute. However, JE to record the expense is not required to do monthly (although we all need to do month end closing entries in real life). you do JE when something happens, e.g. payment, balance sheet date, etc

That's what I guess:)

REG 90
FAR 95
AUD 98
BEC 84

[Author]

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