Question

When the market rate is 8%, a company issues $50,000 of 9%, 10-year bonds dated January 1, 2017, that mature on December 31, 2026, and pay interest semiannually for a selling price of $60,000. When the bonds mature, the issuer records its payment of principal with a (debit/credit)

Answer 1

Bonds payable Dr $50,000

To cash Cr $50,000

Step-by-step explanation:

Debit to bonds payable in the amount of $50,000. Upon maturity, bonds payable will be debited by their face value of $50,000.

The premium received on bonds will be written off in phased manner over the life of the bonds. i.e $60,000 -50,000 = $10,000,

The Journal entry will be:

Date Account Title Debit Credit

Bonds payable $50,000

Cash $50,000