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 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:
|Jan 1, 20XX||Cash||$46,500.00|
|Discount on Bonds payable||$8,500.00|
|(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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from Accounting 101: Financial AccountingChapter 10 / Lesson 10