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Garcia Company issues 9.0%, 15-year bonds with a par value of $310,000 and semiannual interest payments....

Garcia Company issues 9.0%, 15-year bonds with a par value of $310,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 7.0%, which implies a selling price of 114. Prepare the journal entry for the issuance of these bonds for cash on January 1.

Record the issue of bonds with a par value of $310,000 at a selling price of 114.

Date General Journal Debit Credit
Jan 01
Business   Accounting   
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Answer #1

Par value of bonds = $310,000

Issue price = 114

Cash received from issue of bonds = Par value of bond x Issue price

= 310,000 x 114%

= $353,400

Premium on issue of bonds payable = Cash received from issue of bonds- Par value of bonds

= 353,400-310,000

= $43,400

Date General Journal Debit Credit
Jan. 01 Cash $353,400
Premium on bonds payable $43,400
Bonds payable $310,000
( To record issuance of bonds at premium)

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