Question

A corporation issues 13%,15-year bonds with a par value of $570,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 11%, which implies a selling price of 1111/2. Prepare the journal entry for issuance of these bonds for cash on January 1 . Journal entry worksheet Record the issue of bonds with a par value of $570,000 at a selling price of 1111/2

Answer 1

The journal entry for issuance of the bonds would be a debit to cash, credit to bonds payable, and credit to premium on bonds payable.

Step-by-step explanation:

To prepare the journal entry for issuance of the bonds, we need to consider the par value, interest rate, and selling price. On January 1, the corporation issued 13%, 15-year bonds with a par value of $570,000 and a selling price of 1111/2, which is equal to $1,115. The semiannual interest payments need to be calculated based on the par value and interest rate.

The journal entry would be:

1. Debit: Cash ($1,115 * 570,000) = $634,050
2. Credit: Bonds Payable ($570,000)
3. Credit: Premium on Bonds Payable [($634,050 - (570,000 * 1,000))] = $64,050