Question

Prepare the journal entry for the issuance of these bonds. Assume the bonds are issued for cash on January 1, 2016. Garcia Company issues 9.00%, 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 7.00%, which implies a selling price of 118 2/5.

• Record the issue of bonds with a par value of $310,000.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Jan 01, 2016	Cash
	Bonds payable
	Premium on bonds payable

??

Answer 1

Hello Sir/ Mam

Given that:

Selling Price = $118.4

Hence,

Cash Amount = ($118.4/$100)*$310,000=$367,040

Premium = $57,040

Hence, Journal Entry:

Date	General Journal	Debit	Credit
1-Jan-16	Cash	$367,040.00
	Bonds payable		$310,000.00
	Premium on bonds payable		$57,040.00

I hope this solves your doubt.

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