Question

1/1/18 Company Z issues bonds with a par value of $1,000,000, they mature in 10 years, and pay 5% interest semiannually on 6/30 and 12/31. The bonds are sold at a discount of 95% due to a contract rate that is less than the market rate. Amortization is straight line. The journal entry for the issuance of the bonds on 1/1/18 would have a :

Answer 1

Given. Company Z issues bonds with a par value of $1,000,000 which is sold at a discount of 95%. They mature in 10 years and pays 5% interst semiannually on 6/30 and 12/31.

If the issue price is less than the market price, the bonds are issued at discount.

The journal entry for the issuance of the bonds on 1/1/2018 is as follows

Date	Particulars	Debit	Credit
1/1/18	Cash A/c ($1000,000 - $950,000)	$50,000
	Discount on Bonds A/c ($1,000,000 *5%)	$950,000
	Bonds Payable A/c		$1,000,000