Chapter 14, Problem 5PEB

### Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem

# On the first day of the fiscal year, a company issues an $8,000,000, 11%, five-year bond that pays semiannual interest of$440,000 ($8,000,000 × 11% × ½), receiving cash of$8,308,869. Journalize the bond issuance.

To determine

Prepare journal entry to record issuance of the bonds.

Explanation

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations. Premium on bonds payable: It occurs when the bonds are issued at a high price than the face value. Prepare journal entry for issuance of bonds.  Date Account Title and Explanation Post Ref Debit ($) Credit (\$) Cash Â 8,308,869 Â Â Premium on Bonds Payable (1) Â Â 308,869 Â Â Â Bonds Payable Â Â 8,000,000 Â Â Â Â (To record issue of bonds at premium) Â Â Â

Table (1)

• Cash is an asset and it is increased...

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