Question

g Swifty Corporation issued 3,100 5%, 5-year, $1,000 bonds dated January 1, 2022, at face value. Interest is paid each January 1. (a) Prepare the journal entry to record the sale of these bonds on January 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer:

Dr Cash     $3,100,000

Cr Bonds payable            $3,100,000

Explanation:

Since the bonds were issued at face value of $1000 each,the cash proceeds received from the entire issue of 3,100 bonds can be computed thus:

Cash proceeds=$1000*3,100=$3,100,000

The cash proceeds imply that cash inflows have increased by $3,100,000, as a result cash account should be debited with $3,100,00o while the same amount is credited to bonds payable since an increase in  debt obligation should be a credit entry.