Question

Brief Exercise 238 On January 1, 2017, Hannigan Company issued bonds with a face value of $600,000. The bonds carry a stated interest of 7% payable each January 1. Indicate the accounts increased or decreased to record the issuance assuming the bonds are issued at 97. Account Titles Increase/Decrease Amount Indicate the accounts increased or decreased to record the issuance assuming the bonds are issued at 102. Account Titles Increase/Decrease Amount

Answer 1

Solution:

Requirement 1:

Account Titles	Increase / Decrease	Amount
Cash	Increase	$         582,000
Discount on Bonds Payable	Increase	$           18,000
Bonds Payable	Increase	$         600,000

Requirement 2:

Account Titles	Increase /Decrease	Amount
Cash	Increase	$         612,000
Premium on Bonds Payable	Increase	$           12,000
Bonds Payable	Increase	$         600,000

Notes:

1) At the time of issue, every accounts will increase and subsequent entry will decrease the account balances.