Question

On January 1, Duffy Enterprises issued $100,000 in bonds that mature in 10 years. The bonds were issued at face value. The bonds have a stated interest rate of 8% and pay interest once per year on December 31.

Prepare the appropriate journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Given that,

Value of bonds issued = $100,000

Maturity period = 10 years

Bonds were issued at face value.

Interest rate = 8%

Interest is paid once per year on December 31.

Since, the bonds are issued at the face value, so there would be no premium or discount on the issue of bonds.

The cash is received by the company for issuing bonds and it is debited. We know that bonds are a part of liabilities, so they are credited

Therefore, the journal entry is as follows:

Cash A/c Dr. $100,000

To bonds payable $100,000

(To record the issuance of bonds)