Issuance of Long-Term DebtM. Nickles Company issued $1,500,000 of bonds for $1,487,200. Interest is paid semiannually.Required: Hide  1.  Prepare the necessary journal entry to record the issuance of the bonds. If an amount box does not require an entry, leave it blank.       Journal   Account and ExplanationDebitCredit             Record issuance of bond at discount        2.  Is the yield greater or less than the stated rate?SelectGreaterLessCorrect 1 of Item 2How do you know?The input in the box below will not be graded, but may be reviewed and considered by your instructor.

Question
Asked Oct 27, 2019
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Issuance of Long-Term Debt

M. Nickles Company issued $1,500,000 of bonds for $1,487,200. Interest is paid semiannually.

Required:


  Hide    

1.  Prepare the necessary journal entry to record the issuance of the bonds. If an amount box does not require an entry, leave it blank.



 
 
       
 
Journal
   
 
Account and Explanation
Debit
Credit
 
 
 
 
 
 
 
 
 
 
 
 
 
Record issuance of bond at discount
   
       

 

 

2.  Is the yield greater or less than the stated rate?
SelectGreaterLessCorrect 1 of Item 2

How do you know?

The input in the box below will not be graded, but may be reviewed and considered by your instructor.

 
 

 

 

 

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Expert Answer

Step 1

1. Record journal entry for issuance of bo...

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Post Date Account title and explanations Ref. Debit (S) Credit (S Cash Discount on bonds Bonds payable To record issuance of bonds) $1,487,200 $12,800 S1,500,000 Cash is received by issue of bonds cash balance increases by issue of bonds. Hence, cash account is debited for increase. Discount on bonds is a contra liability account. Difference for face value and issued value is discount as issued price is less than face value. Bonds payable is a liability. Bonds payable balance increases by issue and hence it is credited.

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