Question

Crane Company issues $360,000, 20-year, 9% bonds at 102. Prepare the journal entry to record the sale of these bonds on June 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

June 1

enter an account title for the journal entry on June 1

enter a debit amount

enter a credit amount

enter an account title for the journal entry on June 1

enter a debit amount

enter a credit amount

enter an account title for the journal entry on June 1

enter a debit amount

enter a credit amount



Cullumber Company has issued three different bonds during 2022. Interest is payable annually on each of these bonds.

1. On January 1, 2022, 1,400, 6%, 5-year, $1,000 bonds dated January 1, 2022, were issued at face value.
2. On July 1, $710,000, 7%, 5-year bonds dated July 1, 2022, were issued at 103.
3. On September 1, $200,000, 5%, 5-year bonds dated September 1, 2022, were issued at 98.

Answer 1

The journal entry to record the sale of the bonds would be: Debit: Cash $367,200, Debit: Premium on Bonds Payable $7,200, Credit: Bonds Payable $360,000, Credit: Cash $7,200.

The journal entry to record the sale of the bonds would be as follows:

1. Debit: Cash $367,200
2. Debit: Premium on Bonds Payable $7,200
3. Credit: Bonds Payable $360,000
4. Credit: Cash $7,200

1. The company received $367,200 in cash from the sale of the bonds.

This is the face value ($360,000) plus the premium ($7,200) which is the excess amount received above the face value of the bonds.

2. The Premium on Bonds Payable account is debited to recognize the increase in the value of the bonds.

3. The Bonds Payable account is credited to reflect the issuance of the bonds.

4. The Cash account is credited for the premium received.