Splish Brothers Inc. issues $268,000, 10-year, 7% bonds at 97. Prepare the journal entry to...

Question:

Splish Brothers Inc. issues $268,000, 10-year, 7% bonds at 97. Prepare the journal entry to record the sale of these bonds on March 1, 2017.

Bonds Payable:

Bonds payable are always recorded as part of non current liabilities as they have maturity of more than 1 year. They are generally issued in exchange for cash. Bonds bear interest, which means, that accruals shall always be made before the end of the accounting period.

Answer and Explanation:

Account titles Debit Credit
Cash (268,000 x 97%) 259,960
Discount on bonds payable 8,040
Bonds payable 268,000

Bonds are always recorded at their face value. The contra-liability accounts (i,e., discount or premium) are amortized over the life of the bonds.


Learn more about this topic:

Loading...
Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

Chapter 8 / Lesson 7
35K

Related to this Question

Explore our homework questions and answers library