Question

Issuing Bonds at a Discount On the first day of the fiscal year, a company issues a $3,500,000, 6% five-year bond that pays semiannual interest of $105,000 ($3,500,000 × 6% × ½), receiving cash of $3,350,000. Journalize the bond issuance. If an amount box does not require an entry, leave it blank.

Answer 1

Answer:

Cash $3,350,000

Discount on bonds payable $150,000

         To Bond payable $3,500,000

(Being the issuance of the bond is recorded)

Explanation:

The journal entry is shown below

Cash $3,350,000

Discount on bonds payable $150,000

         To Bond payable $3,500,000

(Being the issuance of the bond is recorded)

While recording this transaction we debited the cash account and credited the bond payable as it increased the assets and liabilities plus the difference in the amount would be debited to discount on bond payable