Question

Celine Dion Company issued of 10% 20 -year bonds on January 1, 2014, at Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight-line method of amortization for bond premium or discount.

Instructions:
Prepare the journal entries to record: The issuance of the bonds.

Answer 1

Dr Cash $612,000

Cr bonds payable $600,000

Cr premium on bonds payable $12,000

Step-by-step explanation:

The face value of $600,000 and price factor of 102% are missing from the question:

Proceeds from bond issuance=face value*price factor

Proceeds from bond issuance=$600,000*102%

Proceeds from bond issuance=$612,000

The cash received would be debited to cash account while bonds payable and premium on bonds payable are credited with $600,000 and $12000 respectively