1 answer

Prepare the journal entry for the issuance of these bonds. Assume the bonds are issued for cash on January 1,

Question:

Prepare the journal entry for the issuance of these bonds. Assume the bonds are issued for cash on January 1, 2016. Garcia Company issues 9.00%, 15-year bonds with a par value of $310,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 7.00%, which implies a selling price of 118 2/5.

  • Record the issue of bonds with a par value of $310,000.

Note: Enter debits before credits.

Date General Journal Debit Credit
Jan 01, 2016 Cash
Bonds payable 310,000
Premium on bonds payable

Answers

Par value of bonds 310000
Issue price 118.4
Amount received on issuance 367040
(310000*118.40%)
Journal entry:
Date Accounts title and explanations Debit $ Credit $
01.01.16 Cash account 367040
     Bonds Payable 310000
     Premium on Bonds Payable (367040-310000) 57040
.

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