Question

E-Tech Initiatives Limited plans to issue $630,000, 10-year, 6.00 percent bonds. Interest is payable annually on December 31. All of the bonds will be issued on January 1, 2019. Show how the bonds would be reported on the January 2, 2019, balance sheet if they are issued at 103.

Answer 1

Assuming that the par value of a bond is 100 and they are issued at 103 it means that they were sold at a premium. First we have to find the number of bonds

630,000/100=6300

Cash received = 6300*103=648,900

Premium = 648900-630000=18,900

Accounting Entry

Cash Debit Credit

648,900

Bonds/Debt 630,000

Premium 18,900

Step-by-step explanation: