Date, bonds sold at a premium
Dr Cash $28620000000
Cr Bonds payable $2,700,000,000
Cr Premium on bonds payable $1,62,000,000
Explanation:
The total face value of the bonds is $1,000 x 2700,000 bonds = $2,700,000,000
since the bonds were sold at 106, their price was =
$2,700,000,000 x 106% = $28620000000
the difference between the face value and the actual market price = $2,862,000,000 - $2,700,000,000 = $1,62,000,000 must be recorded as premium on bonds payable (increases the bonds' carrying value)
<h3>What is the difference between market value and face value?</h3>
- The market value is the actual price at which the security trades on the open market, as well as the price that fluctuates when the yield reacts to changes in interest rates.
- The face value is determined by the issuing company. It may be the value at which the firm redeems the shares at some point in the future, but there is no guarantee.
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