qs 14-8 (algo) journalizing premium bond issuance lo p3\ngarcia company issues 10.0%, 15 - year bonds with a…
qs 14-8 (algo) journalizing premium bond issuance lo p3\ngarcia company issues 10.0%, 15 - year bonds with a par value of $330,000 and semiannual interest payments. on the issue date, the annual market rate for these bonds is 8.0%, which implies a selling price of 119 1/2.\nprepare the journal entry for the issuance of these bonds for cash on january 1.\nview transaction list\njournal entry worksheet\n1\nrecord the issue of bonds with a par value of $330,000 at a selling price of 119 1/2.\nnote: enter debits before credits.\ndate general journal debit credit\njanuary 01
Answer
Explanation:
Step1: Calculate the cash received
The selling - price is 119 1/2 or 119.5% of the par value. The par value of the bonds is $330,000. So, the cash received is $330,000×1.195 = $394,350.
Step2: Determine the premium on bonds payable
The premium on bonds payable is the difference between the cash received and the par value of the bonds. Premium = Cash received - Par value = $394,350 - $330,000=$64,350.
Step3: Record the journal entry
When bonds are issued at a premium, we debit Cash for the amount received, credit Bonds Payable for the par value, and credit Premium on Bonds Payable for the premium amount.
| Date | General Journal | Debit | Credit |
|---|---|---|---|
| January 01 | Cash | $394,350 | |
| Bonds Payable | $330,000 | ||
| Premium on Bonds Payable | $64,350 |
Answer:
| Date | General Journal | Debit | Credit |
|---|---|---|---|
| January 01 | Cash | $394,350 | |
| Bonds Payable | $330,000 | ||
| Premium on Bonds Payable | $64,350 |