Question

Required information [The following information applies to the questions displayed below] Hillside issues $4,000,000 of 6%, 15-year bonds dated January 1,2021 , that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,456,448. Required: Prepare the January 1 journal entry to record the bonds' issuance.

Answer 1

The journal entry to record the issuance of the bonds on January 1, 2021, is as follows: Debit Cash for $3,456,448, Credit Bonds Payable for $4,000,000, and Credit Discount on Bonds Payable for $543,552.

Step-by-step explanation:

The journal entry to record the issuance of the bonds on January 1, 2021, would be as follows:

1. Debit Cash for $3,456,448 (the proceeds from the bond issuance).
2. Credit Bonds Payable for $4,000,000 (the face value of the bonds).
3. Credit Discount on Bonds Payable for $543,552 (the difference between the face value and the proceeds).

This entry recognizes the cash received from the issuance of the bonds, the liability created by the bonds payable, and the discount associated with the difference between the face value and the proceeds.