Question

On January 1, 2017 Nowell Company issued $200,000 in bonds that mature in ten years. The bonds have a stated interest rate of 6% and pay interest on June 30 and December 31 each year. Required: Complete the Answer Sheet for Bonds assuming the following. a) The bonds were issued at face value. b) The bonds were issued when the market rate of interest was 5% and sold for $215,589.

Answer 1

1) Journal Entry for Issuance of the Bond at Face value
Date	Accounts Title and Explaination	Debit($)	Credit($)
01-01-17	Cash A/c                          Dr.	$ 200,000.00
	To Bonds Payable A/c		$ 200,000.00
	(Being Bonds were issued at the face value)
2) Journal Entry for issuance of bond when market rate of interest was 5% and sold for $215,589
Date	Accounts Title and Explaination	Debit($)	Credit($)
01-01-17	Cash A/c                          Dr.	$ 215,589.00
	To premium on Bonds payable		$ 15,589.00
	To Bonds Payable A/c		$ 200,000.00
	(Being Bonds were issued at a premium )