Question

Issuing Bonds at a Discount On the first day of the fiscal year, a company issues a $4,000,000, 6%, 8-year bond that pays semiannual interest of $120,000 ($4,000,000 × 6% × ½), receiving cash of $3,325,959. Journalize the bond issuance. If an amount box does not require an entry, leave it blank.

Answer 1

Answer:

Dr cash proceeds                          $3,325,959

Dr discount on bonds payable        $674,041

Cr bonds payable                                               $4,000,000

Explanation:

The cash proceeds from the bond issuance is $3,325,959

The face value of the bond issued is $4,000,000

Discount on bond  issuance=$4,000,000-$3,325,959

Discount on bond  issuance=$674,041.00  

The appropriate double entries would be to debit the cash account and discount on bonds payable with $3,325,959 and $674,041 resepectively while bonds payable is credited with $4,000,000