Question

Presented below is a partial amortization schedule for Discount Foods:

Period Cash Interest Carrying Increase in
Issue Paid Expense Value Carrying
Date Value
$ 74,700
1 $ 2,500 $ 2,984 $ 484 75,184
2 2,500 2,996 496 75,680
1. Record the bond issue assuming the face value of bonds payable is $80,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Dr cash $74,700

Dr discount on bonds payable $5,300

Cr bonds payable $80,000

Step-by-step explanation:

From all indications,$74,700 cash realized from the bond issue,hence discount on bonds issuance is $5,300 was recorded($80,000-$74,700)

The cash proceeds would be debited to cash account,with the discount debited to discount on bonds payable account while the face value of $80,000 would be credited to bonds payable account in order to reflect in the account the future cash obligation owed by the company to bondholders.