Question

Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $7,800,000 of 10-year, 6% bonds at a market (effective) interest rate of 3%, receiving cash of $9,808,729. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction, if an amount box does not require an entry, leave it blank.

Answer 1

Answer:

Cash Dr $9,808,729

       To Premium on bond payable $2,008,729

       To Bond payable $7,800,000

(Being the issuance of the bond payable is recorded)

Explanation:

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

Cash Dr $9,808,729

       To Premium on bond payable $2,008,729

       To Bond payable $7,800,000

(Being the issuance of the bond payable is recorded)

For recording this we debited the cash as it increased the assets and credited the premium on bond payable as issued amount is more than the face value plus the liabilities is also increased so the bond payable is also credited