Question

On January 1, Parson Freight Company issues 8.0%, 10-year bonds with a par value of $3,200,000. The bonds pay interest semiannually. The market rate of interest is 9.0% and the bond selling price was $2,982,557. The bond issuance should be recorded as:

Answer 1

Dr Cash 2,982,557

Dr Discount on bonds payable 217,443

Cr Bonds payable 3,200,000

Step-by-step explanation:

Preparation for the bond issuance Journal entry

Since we were told that the Company has par value of the amount of $3,200,000 and the bond selling price of $2,982,557 which means the bond issuance should be recorded as:

Dr Cash 2,982,557

Dr Discount on bonds payable 217,443

(3,200,000-2,982,557)

Cr Bonds payable 3,200,000