Answers
| Date | Account Titles and Explanation | Debit | Credit |
| January 1 | Cash | $1,200,000 | |
| Bonds payable | $1,200,000 | ||
| ( To record issuance of bonds) | |||
| July 1 | Cash | $902,700 | |
| Premium on bonds payable | $17,700 | ||
| Bonds payable | $885,000 | ||
| ( To record issuance of bonds on premium) | |||
| September 1 | Cash | $363,750 | |
| Discount on bonds payable | $11,250 | ||
| Bonds payable | $375,000 | ||
| ( To record issuance of bonds on discount) |
1.
Cash proceeds from issue of bonds = Number of bonds x Par value one bond
= 1,200 x 1,000
= $1,200,000
2.
Par value of bonds = 885,000
Issue price = 102
Cash proceeds from issue of bonds = 885,000 x 102%
= $902,700
Premium on bonds payable = Cash proceeds from issue of bonds - Par value of bonds
= 902,700-885,000
= $17,700
3.
Par value of bonds = 375,000
Issue price = 97
Cash proceeds from issue of bonds = 375,000 x 97%
= $363,750
Discount on bonds payable = Par value of bonds - Cash proceeds from issue of bonds
= 375,000-363,750
= $11,250
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