Question

On April 1, 2016, Alpha Company issued $500,000 of 12%, 10-year bonds. The bonds, which were issued at 103, pay interest on October 1 and April 1. Use this information to prepare the General Journal entry (without explanation) to record the April 1, 2016 bond issue. If no entry is required then write "No Entry Required."

Answer 1

cash 515,000 debit

bonds payable 500,000 credit

Premium on Bonds 15,000 credit

Step-by-step explanation:

to know the cash proceeds fro mthe issuance of the bonds we will multiply the face value by the point issued:

500,000 x 103 / 100 = 515,000

As the amount collected is higher than face value we reocgnize a Premium on Bonds Payable for the difference:

515,000 - 500,000 = 15,000