Question

On January 1, 2018, Crane Corporation issued $5400000, 10-year, 9% bonds at 102. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2018 is

Answer 1

Answer and Explanation:

The journal entry is as follows;

Cash ($5,400,000 × 102%) $5,508,000

To Bonds Payable $5,400,000

To Premium on Bonds Payable $108,000

(Being issuance of the bond payable is recorded)

Here the cash is debited as it increased the assets and credited the bond payable and premium on bond payable as it increased the liabilities