Question

Bridle Inc. issues $300,000, 10-year, 8% bonds at 98. Prepare the journal entry to record the sale of these bonds on March 1, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

Answer:

Cash                294,000 debit

discount on BP    6,000 debit

     Bonds payable         300,000 credit

--to record issuance of bonds--

Explanation:

We multiply the face value by the issuance quote over 100

300,000 x 98/100 = 294,000

Then, the difference will be considered discount as the bond were issued below their face value

300,000  -   294,000 = 6,000

We are going to debit cash for the amount collected and then, debit the discount to adjust the bonds payable to the carrying value of 294,000