Question

Archer Inc. issued $4,000,000 par value, 7% convertible bonds at 99 for cash. If the bonds had not included the conversation feature, they would have sold for 95. Prepare the journal entry to record the issuance of the bonds.

Answer 1

Answer: Dr Cash $3,960,000

Dr Discount on bonds payable $40,000

Cr Bonds payable $4,000,000

Explanation:

The journal entry to record the issuance of the bonds will be prepared as follows:

Dr Cash = 4,000,000 × 99% = $3,960,000

Dr Discount on bonds payable = $40,000

Cr Bonds payable = $4,000,000

(To record bond issued on discount)