On June 1, 2016, Alpha Corporation issued $300,000 of 9%, 5-year bonds. The bonds which were...

Question:

On June 1, 2016, Alpha Corporation issued $300,000 of 9%, 5-year bonds. The bonds which were issued at 97, pay interest on January 1 and June 1. Use this information to prepare the General Journal entry (without explanation) to record the June 1, 2016 bond issue.

Bonds Payable

Bonds Payable are typically debt securities and classified in the balance sheet as non-current liabilities up to its maturity date. Bonds are one of the ways to raise cash through debt financing and most of the corporations are even governments used bonds and sell to prospective investors.

Answer and Explanation:

Accounts Debit Credit
Cash (300,000 * 97) 291,000
Discount on Bonds Payable 9,000
Bonds Payable 300,000

The bonds are issued at a discount, hence the bond issuer will receive less than the bond's par value.


Learn more about this topic:

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Bonds: Types, Characteristics and Issuing Procedures

from Accounting 101: Financial Accounting

Chapter 10 / Lesson 7
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