Question

Prepare the journal entry for the issuance of the bonds. Assume the bonds are issued for cash on January 1, 2017.

Enviro Company issues 10%, 10-year bonds with a par value of $300,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 12%, which implies a selling price of 88 1/2.

Prepare the journal entry for the issuance of these bonds. Assume the bonds are issued for cash on January 1, 2017.

Garcia Company issues 10.00%, 15-year bonds with a par value of $330,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8.00%, which implies a selling price of 119 1/2.

Answer 1

Solution:(1): Following is the required journal entry:

Cash A/C Debit. $265,500

Discount on Bonds Payable A/C Debit. $34,500

Bonds Payable A/C Credit. $300,000

Solution:(2): Following is the required journal entry:

Cash A/C Debit. $394,350

Premium on Bonds Payable A/C Credit. $64,350

Bonds Payable A/C. Credit. $330,000