Question

On January 1, 2018, Bonita Corporation issued $5900000, 10-year, 9% bonds at 101. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2018 is

Answer 1

Answer and Explanation:

The journal entry to record the issuance of the bond is shown below

On Jan 1, 2018

Cash (5,900,000 × 101%) $5,959,000

Bonds Payable $5,900,000

Premium on Bonds Payable $59,000

(Being the issuance of the bond is recorded)

Here the cash is debited as it increased the assets and credited the bond payable & premium on bond payable as it also increased the liabilities