6. On January 1, a company issues bonds dated January 1 with a par value of $340

ID: 2484824 • Letter: 6

Question

6. On January 1, a company issues bonds dated January 1 with a par value of $340,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 12% and the bonds are sold for $327,490. The journal entry to record the issuance of the bond is:

Debit Cash $327,490; debit Premium on Bonds Payable $12,510; credit Bonds Payable $340,000.

Debit Cash $327,490; credit Bonds Payable $327,490.

Debit Cash $327,490; debit Discount on Bonds Payable $12,510; credit Bonds Payable $340,000.

Debit Bonds Payable $340,000; debit Bond Interest Expense $12,510; credit Cash $352,510.

Debit Cash $340,000; credit Discount on Bonds Payable $12,510; credit Bonds Payable $327,490.

Debit Cash $327,490; debit Premium on Bonds Payable $12,510; credit Bonds Payable $340,000.

Debit Cash $327,490; credit Bonds Payable $327,490.

Debit Cash $327,490; debit Discount on Bonds Payable $12,510; credit Bonds Payable $340,000.

Debit Bonds Payable $340,000; debit Bond Interest Expense $12,510; credit Cash $352,510.

Debit Cash $340,000; credit Discount on Bonds Payable $12,510; credit Bonds Payable $327,490.

Explanation / Answer

Journal entry will be

Cash 327490

Discount on bonds payable 12510

Bonds Payable 340000

Since bonds are issued at discount, discount on bonds payable will be debited in journal entry

Bonds will be recorded with their payment liability of 340000

and cash received will be debited with amount received

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6. On January 1, a company issues bonds dated January 1 with a par value of $340

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Explanation / Answer

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