Question

Splish Brothers Inc. issues $257,000, 10-year, 8% bonds at 99. Prepare the journal entry to record the sale of these bonds on March 1, 2022.

Answer 1

Par value of bonds = $257,000

Issue price of bonds = 99

Cash receipts from issue of bonds = 257,000 x 99% = 254,430

Discount on bonds payable = Par value of bonds - Cash receipts from issue of bonds

= 257,000-254,430

= $2,570

Date Account Titles and Explanation Debit Credit

March 1 Cash $254,430

Discount on bonds payable $2,570

Bonds payable $257,000

(To record issuance of bonds)