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Randle Inc. issues $300,000, 10-year, 8% bonds at 98. 1. Prepare the journal entry to record the...

Question:

Randle Inc. issues $300,000, 10-year, 8% bonds at 98.

1. Prepare the journal entry to record the sale of these bonds on March 1, 2019.

2. Prepare entry for bonds issued.

Bonds

Bonds are a long-term liability issued either in the primary or secondary market and the bond investor will receive periodic interest income based on the market rate. The first bond issued in the world is from the East Dutch India Company in the 1600s and the first sovereign bond was issued by the Bank of England in 1694.

Answer and Explanation:

Study.com team: Information is incomplete. Nevertheless, I will assume the date for illustrative purposes.

1. Prepare the journal entry to record the sale of these bonds on March 1, 2019.

In this case, we will use straight-line amortization and the bonds were sold at its carrying value.

Accounts Debit Credit
Bonds Payable 300,000
Discount on Bonds Payable (6,000 / 10 years * 9 years) 5,400
Cash 294,000

2. Prepare entry for bonds issued. Assuming that the bonds issued on March 1, 2018.

Accounts Debit Credit
Cash (300,000 * 98) 294,000
Discount on Bonds Payable 6,000
Bonds Payable 300,000

Learn more about this topic:

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Current & Long-Term Liabilities: Definition & Characteristics

from Accounting 101: Financial Accounting

Chapter 10 / Lesson 1
10K

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