Question

Exercise 15-2 On January 1, 2017, Klosterman Company issued $420,000, 12%, 10-year bonds at face value. Interest is payable annually on January 1. Prepare the journal entry to record the issuance of the bonds.

Answer 1

Answer:

The journal entry to record the bond issuance is shown below:

Explanation:

The journal entry to record the bond issuance is as:

Cash A/c.............................................Dr  $420,000

        Bonds Payable A/c......................Cr  $420,000

Being the bonds issued

As the bonds are issued by the company so cash is coming into the business, which is an asset and any increase in asset is debited. Therefore, the cash account is debited. And cash is received against the bonds payable, so the account of bonds payable is credited.