Question

Marigold Corp. issues $220,000, 20-year, 8% bonds at 104. Prepare the journal entry to record the sale of these bonds on June 1, 2020

Answer 1

Selling Price of Bonds = Value of bonds * Issue price / Face price

Selling Price of Bonds = $220,000 * 104/100

Selling Price of Bonds = $228,800

Journal Entry

Date Account Title and Explanation Debit Credit

1 June Cash $228,800

Bond payable $220,000

Premium on bond payable $8,800

(To record issuance of bond)

Working

Premium On Bonds Payable = Selling Price of Bonds - Value of Bonds

= $228,800 - $220,000

= $8,800