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Your company sells $55,000 of one-year, 10% bonds for an issue price of $46,500. The journal...

Question:

Your company sells $55,000 of one-year, 10% bonds for an issue price of $46,500. The journal entry to record this transaction will include a credit to Bonds Payable in the amount of what?

Bonds Payable:

Bonds payable are issued either at par, at a discount or a premium. The carrying value of the bonds is adjusted for premium or discount. The balance in the bonds payable account is adjusted for the amortization of the premium or discount.

Answer and Explanation:


The journal entry to record the issue of bonds is as follows:


Date Account title Debits($) Credit($)
Jan 1, 20XX Cash $46,500.00
Discount on Bonds payable $8,500.00
Bonds payable $55,000.00
(to record issue of bonds at a discount)


Face value of the bond = $55,000

Issue price of the bond = $46,500

Disocunt on bond spayable = $55,000 - $46,500 = $8,500

The bonds payable is always credited with the face value of the bond i,e $55,000 in this case.

The carrying value of the bonds payable = face value - discount on bonds payable.


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Issuing Bonds at a Discount or a Premium

from Accounting 101: Financial Accounting

Chapter 10 / Lesson 10
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