Exercise 10-11 Concord Corporation issued $493,500 of 5-year, 5% bonds at 98 on

Question

Exercise 10-11 Concord Corporation issued $493,500 of 5-year, 5% bonds at 98 on January 1, 2019. The bonds pay interest annually. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Compute the total cost of borrowing for these bonds. Total cost of borrowing s Prepare the journal entry to record the issuance of the bonds, assuming the bonds were issued at 103. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Explanation / Answer

SOLUTION

(1)

Cost of borrowings = ($493,500 * 5% * 5 years) + Discount on bonds payable

= $123,375 + $9,870 = $133,245

(2)

Cost of borrowings = ($493,500 * 5% * 5 years) - Premium on bonds payable

= $123,375 - $14,805 = $108,570

S.No. Accounts title and Explanations Debit ($) Credit ($) 1. Cash ($493,500 * 98%) 483,630 Discount on bonds payable($493,500 * 2%) 9,870 Bonds Payable 493,500 (To record issuance of bonds at discount)

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