Question

A corporation issues 8%,10-year bonds with a par value of $650,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 . Prepare the journal entry for issuance of the bonds for cash on January 1. Journal entry worksheet Record the issue of bonds with a par value of $650,000.

Answer 1

To prepare the journal entry for the issuance of bonds for cash, you would record the selling price of the bonds, the par value of the bonds, and the discount on bonds payable.

Step-by-step explanation:

To prepare the journal entry for the issuance of bonds for cash on January 1, you would record the following:

1. Debit Cash for the selling price of the bonds, which is $565,500 (87% x $650,000).
2. Credit Bonds Payable for the par value of the bonds, which is $650,000.
3. Credit Discount on Bonds Payable for the difference between the par value and the selling price, which is $84,500 ($650,000 - $565,500).

So, the journal entry would be:

Debit: Cash $565,500

Credit: Bonds Payable $650,000

Credit: Discount on Bonds Payable $84,500