Question

Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $3,900,000 of 10-year, 6% bonds at a market (effective) interest rate of 4%, receiving cash of $4,537,708. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction, if an amount box does not require an entry, leave it blank.

Answer 1

Please see journal entries bellow;

On April 1,

Issuance of bond.

Cash account Dr $4,537,708

To bonds payable account

$3,900,000

To premium on bonds payable

$537,708

Step-by-step explanation:

Daan corporation issued $3,900,00 of 10-year, 6% bonds at a market(effective) interest rate of 4% receiving cash of $4,537,708.

Bond issuance is ;

Cash received - face value= premium.

Journal Entries

On April 1,

Issuance of bond.

Cash account Dr $4,537,708

To bonds payable account

$3,900,000

To premium on bonds payable

$537,708