On January 1, a company issues bonds dated January 1 with a par value of $360,00
ID: 2501676 • Letter: O
Question
On January 1, a company issues bonds dated January 1 with a par value of $360,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $374,613. The journal entry to record the issuance of the bond is:
Debit Cash $374,613; credit Discount on Bonds Payable $14,613; credit Bonds Payable $360,000.
Debit Bonds Payable $360,000; debit Bond Interest Expense $14,613; credit Cash $374,613.
Debit Cash $360,000; debit Premium on Bonds Payable $14,613; credit Bonds Payable $374,613.
Debit Cash $374,613; credit Bonds Payable $374,613.
Debit Cash $374,613; credit Premium on Bonds Payable $14,613; credit Bonds Payable $360,000.
Explanation / Answer
Debit Cash $374,613; credit Premium on Bonds Payable $14,613; credit Bonds Payable $360,000.
Whole amount received in cash is debited;
Face value of bond credited;
any excess of issue price from face value is credited as premium.