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Five thousand bonds with a face value of $1000 each, are sold at 110. The entry to record the issuance is

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Answer:

Date, bonds sold at a premium

Dr Cash 5,500,000

Cr Bonds payable 5,000,000

Cr Premium on bonds payable 500,000

Step-by-step explanation:

The total face value of the bonds is $1,000 x 5,000 bonds = $5,000,000

since the bonds were sold at 110, their price was $5,000,000 x 110% = $5,500,000

the difference between the face value and the actual market price = $5,500,000 - $5,000,000 = $500,000 must be recorded as premium on bonds payable (increases the bonds' carrying value)

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