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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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Brief Exercise Issuance of Long-Term Debt

Natalie Corp. provides medical supplies to hospitals located in Western Washington and Oregon. This year, Natalie Corp. issued 8,000 bonds with a $1,000 face value. The nominal rate for each bond is 7%.

Required:

Prepare the necessary journal entries to record the issuance of these bonds assuming the bonds were issued (a) at par, (b) at 103, and (c) at 96.

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.

To prepare:

The Journal entries for issuance of bonds.

Explanation

The Journal entries for issuance of bonds are explained as follows:

Natalie Corp.
Journal Entries
# Account Titles Debit Credit
(a) Cash (8000*1000) $ 8,000,000
Bonds Payable $ 8,000,000
(Being bonds issued at par)
(b) Cas...

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