Question

Ivanhoe Company issued $250,000 of 10%, 20-year bonds on January 1, 2022, at face value. Interest is payable annually on January 1.
(a) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer:

Dr. Cash                 $250,000

Cr. Bond Payable  $250,000

Explanation:

Bonds issued are the liabilities for the company because it company received cash against the bonds which will be paid at maturity along with the interest.

As cash is an asset and it is being received, to increase the value of cash balance we debited the cash account. The bond is a liability and to add a value in a liability account we need to credit the bond payable account.