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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Cornerstone Exercise 9-25 Issuance of Long-Term Debt

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

Required:

  1. Prepare the necessary' journal entry to record the issuance of the bonds.
  2. Is the yield greater or less than the stated rate? How do you know?

To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date. Bonds may be issued at a premium or discount.

Requirement 1:

To prepare:

The Journal entry for issuance of bonds.

Explanation

The Journal entry for issuance of bonds is explained as follows:

...
Journal Entries
Date Account Titles Debit Credit
To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date. Bonds may be issued at a premium or discount.

Requirement 2:

To identify:

If the bond yield is greater or less than the stated rate.

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