Question

# 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

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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