Question

On January 1, Year 1, St. Clair Corporation issues 7%, 11-year bonds with a face amount of $90,000 for $83,497. The market interest rate is 8%. Interest is paid semiannually on June 30 and December 31. Complete the necessary journal entry for the issuance of the bonds by selecting the account names from the drop-down menus and entering the associated dollar amounts. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:

The journal entry for the issuance of the bond is shown below:

Explanation:

The entry will be recorded on January 1

Cash A/c..............................................Dr     $83,497

Discount on bonds payable A/c......Dr   $6,503

           Bonds Payable A/c............................Cr   $90,000

On issuing the bond, cash is increasing, any increase in cash is debited. Therefore, the cash account is debited. The discount on bonds payable is debited. And the bonds payable account is credited.

Working Note:

Discount on bonds payable = Bonds payable - Cash

= $90,000 - $83,497

= $6,503