Question

On July 1, 2016, Superman Corp, issued $100,000 in 7%, 10-year bonds at a price of 106. Interest is payable semi-annually starting December 31, 2016. The journal entry for Superman's issuance of the bonds was:

Answer 1

The journal entry for Superman Corp's issuance of the bonds on July 1, 2016, is: Debit: Cash $106,000, Credit: Bonds Payable $100,000, Credit: Premium on Bonds Payable $6,000.

Step-by-step explanation:

The journal entry for Superman Corp's issuance of the bonds on July 1, 2016, can be recorded as follows:

1. Debit: Cash $106,000
2. Credit: Bonds Payable $100,000
3. Credit: Premium on Bonds Payable $6,000

The company receives $100,000 in cash as the bonds are issued at a price of 106. The Bonds Payable account is credited to indicate the liability, and the Premium on Bonds Payable account is credited to record the difference between the cash received and the face value of the bonds.