Question

On January 1, Year 1, McClurg Corporation issues 5%, 11-year bonds with a face amount of $70,000 for $76,180. The market interest rate is 4%. Interest is paid semiannually on June 30 and December 31. Complete the necessary journal entry for the issuance of the bonds by selecting the account names from the drop-down menus and entering the associated dollar amounts. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

The journal entry to record the issuance of the bonds would be: Debit Cash $76,180, Credit Bonds Payable $70,000, Credit Premium on Bonds Payable $6,180.

Step-by-step explanation:

To record the issuance of the bonds, the journal entry would be as follows:

1. Debit: Cash $76,180
2. Credit: Bonds Payable $70,000
3. Credit: Premium on Bonds Payable $6,180

The debit to Cash represents the amount received from the issuance of the bonds. The credit to Bonds Payable represents the face value of the bonds. The credit to Premium on Bonds Payable represents the difference between the face value of the bonds and the amount received, which is recorded as a liability on the balance sheet.

Answer 2

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

Step-by-step explanation:

The entry to be posted on Jan 1

Cash A/c..............................................Dr $76,180

Premium on bonds payable A/c........Cr $6,180

Bonds Payable A/c..................................Cr $70,000

As bonds issued, so cash is increasing and any increase in cash is debited. Therefore, the cash account is debited. But the bonds issued at a premium so the premium on the bonds payable will be credited. And bonds payable account is credited.