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 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:
|Cash (268,000 x 97%)||259,960|
|Discount on bonds payable||8,040|
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.
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from Financial Accounting: Help and ReviewChapter 8 / Lesson 7