Question

Pharoah Company issued $530,000 of 5-year, 5% bonds at 97 on January 1, 2020. The bonds pay interest annually. Your answer is partially correct. Try again. Prepare the journal entry to record the issuance of the bonds

Answer 1

Dr. Cr.

Cash $514,100

Discount on bond payable $15,900

Bond Payable $530,000

Step-by-step explanation:

Cash is received against the Bond issued is debited due to its debit nature and the bond payable account is credited because it is a liability and its nature is credit.

Cash Received = ( 530,000 / 100 ) x 97 = $514,100

Discount = (530,000/100) x (100 - 97) = $15,900