Question

Ivanhoe Co. is building a new hockey arena at a cost of $2,750,000. It received a downpayment of $350,000 from local businesses to support the project, and now needs to borrow $2,400,000 to complete the project. It therefore decides to issue $2,400,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 9%.

Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Round present value fact the account titles and enter o for the amounts. Credit account titles are automatically indented wher Debit Credit Date Account Titles and Explanation January 1, 2019 Cash Bonds Payable Premium on Bonds Payable

Answer 1

Answer
Date	Particulars	Debit	Credit
January 1, 2019	Cash	$     2,554,020
	Bonds payable		$     2,400,000
	Premium on bonds payable		$        154,020
	(To record issuance of bonds at premium)
Working Note
Present value of Coupon payment at 9% = 240000*(6.41765) = $ 1,540,236
Present value of maturity value at 9% = 2400000*(0.42241) = $1,013,784
Issuance price of bond = $ 2,554,020