On January 1, a company issues bonds dated January 1 with a par value of $310,00

Question

On January 1, a company issues bonds dated January 1 with a par value of $310,000. 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 10% and the bonds are sold for $321,964. The journal entry to record the issuance of the bond is Debit Cash $310,000; debit Premium on Bonds Payable $11,964; credit Bonds Payable $321,964. Debit Cash $321,964; credit Premium on Bonds Payable $11,964; credit Bonds Payable $310,000. Debit Bonds Payable $310,000; debit Bond Interest Expense $11,964; credit Cash $321,964. Debit Cash $321,964; credit Discount on Bonds Payable $11,964; credit Bonds Payable $310,000. Debit Cash $321,964; credit Bonds Payable $321,964.

Explanation / Answer

Journal entry :

so answer is b) Debit cash $321964; Credit premium on bonds payable $11964; Credit bonds payable $310000

Jan 1 Cash 321964      Premium on bonds payable 11964      Bonds payable 310000

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