Question

On January 1, 20X1, Meister Company issues $200,000 of 6% bonds. Interest of $6,000 is payable semiannually on June 30 and December 31. The bonds mature in 5 years. The bonds were issued at face amount. All the bonds are privately placed with one investor. On the date of issue, the investor should record what journal entry?

Answer 1

The investor should record a journal entry debiting Cash and crediting Bonds Payable.

Step-by-step explanation:

On the date of issue, the investor should record the following journal entry:

Debit: Cash - $200,000

Credit: Bonds Payable - $200,000

This entry records the cash received from the investor as a debit to Cash, and the issuance of bonds as a credit to Bonds Payable.

Since the bonds were issued at face amount, there is no discount or premium to account for.