Question

On January 1, a company issues bonds dated January 1 with a par value of $340,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31, The market rate is 10% and the bonds are sold for $353,122. The journal entry to record the issuance of the bond is: Multiple Choice 122 credi Bonds Payebie $353122 Debit Cash $353,122: credit Bonds Payable $353,122 Debit Cash $340,000, debit Premium on Bonds Payable $13.122; credit Bonds Payable $353122. Discussions So con Debit Cash $353122; credit Discount on Bonds Payable $13122: credit Bonds Payable $340,000 Debit Bonds Payable $340,000, debit Bond Interest Expense $13,122; credit Cash $353.122 Debit Cash $353122 credit Premium on Bonds Payable $13,122; credit Bonds Payable

Answer 1

Answer:

Debit Cash $353122 credit Premium on Bonds Payable $13,122; credit Bonds Payable $340,000

Explanation:

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

Cash A/c Dr $353,122

      To Premium on Bonds Payable $13,122

      To Bonds payable $340,000

(Being issuance of the bond is recorded and the remaining balance is credited to the Premium on Bonds Payable)

Remaining balance = Sale value of the bond  - issued value of the bond

= $353,122 - $340,000

= $13,122