Prepare the journal entries for the issuance of the bonds. Assume the bonds are
ID: 2484407 • Letter: P
Question
Prepare the journal entries for the issuance of the bonds. Assume the bonds are issued for cash on
January 1, 2015.
Enviro Company issues 8%, 10-year bonds with a par value of $230,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1/2.
Prepare the journal entries for the issuance of the bonds. Assume the bonds are issued for cash on
January 1, 2015.
Enviro Company issues 8%, 10-year bonds with a par value of $230,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1/2.
Explanation / Answer
Being Bonds wre issued on discount from the par value i.e. $230,00 X 87.50% = $201,250, the Journal entry shall be:
Date
Journal Entry
Debit
Credit
Jan 01, 2015
Cash
$201,250
Discount on bonds payable
$28,750
Bonds Payable
$230,000
Date
Journal Entry
Debit
Credit
Jan 01, 2015
Cash
$201,250
Discount on bonds payable
$28,750
Bonds Payable
$230,000