Question

On January 1, 2017, Hannigan Company issued bonds with a face value of $600,000. The bonds carry a stated interest of 7% payable each January 1. 1. Prepare the journal entry for the issuance assuming the bonds are issued at 97. 2. Prepare the journal entry for the issuance assuming the bonds are issued at 102.

Answer 1

Step-by-step explanation:

The journal entries are shown below:

Cash A/c Dr $582,000 ($600,000 × 0.97)

Discount on Bonds Payable A/c Dr $18,000

To Bonds payable A/c $600,000

(Being the issuance of the bond is recorded and the remaining balance is debited to the discount on bond payable account)

Cash A/c Dr $612,000 ($600,000 × 1.02)

To Bonds payable A/c $600,000

To Premium on bonds payable A/c $12,000

(Being the issuance of the bond is recorded and the remaining balance is credited to the premium on bond payable account)