Question

issues 5 year 10% coupon bonds for cash and receives 93% of the face value of...

issues 5 year 10% coupon bonds for cash and receives 93% of the face value of the bonds. Each bond has a $1,000 face value. The bonds pay interest once per year beginning December 31st 2019. The market rate of interest for these bonds (yield) was 12%., quantity of the bond is 298. the price is 930. Record the journal entry for the bond issue.

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Answer #1

Quantity of Bond = 298

Face Value of Bonds issued = 298 @ $1,000 each i.e. $298,000

Cash Receipt from issue of Bond = 298 @ $930 each i.e. $277,140

Discount on Issue of Bond = $298,000 - $277,140 i.e. $20,860

Journal Entry for the Bond Issue

Dr. Cash $277,140

Dr. Discount on Bonds Payable $20,860

Cr. Bonds Payable $298,000

(Extra: Journal Entry at payment of interest for first year ending December 31, 2019

Dr. Interest Expense $33,972

Cr. Discount on Bonds Payable $4,172

Cr. Cash $29,800)

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