Question

Prepare the journal entry for the issuance of these bonds. Assume the bonds are issued for cash on January 1, 2017. Garcia Company issues 9.00%, 15-year bonds with a par value of $400,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 7.00%, which implies a selling price of 115 3/4.

Answer 1

Journal Entries for jan 1, 2017

Step-by-step explanation:

Face value of bond = 400,000

Proceeds = 400,000 X 1.1575 = 463,000

Premium = 463,000 - 400,000 = 63,000

Jan 1, 2017

Debit Credit

Cash 463,000

Premium 63,000

Bond payable 400,000