Question

Brief Exercise 10-9 Nasreen Company issues $2,000,000, 10-year, 7% bonds at 97, with interest payable on July 1 and January 1.

Prepare the journal entry to record the sale of these bonds on January 1, 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1

Assuming instead that the above bonds sold for 105, prepare the journal entry to record the sale of these bonds on January 1, 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1

Answer 1

1)
Date	Account Titles and Explanation	Debit	Credit
Jan. 1	Cash	$ 19,40,000
	Discount on bonds payable	$       60,000
	Bonds Payable		$ 20,00,000
	(To record issuance of bonds payable)
Working:
	Par Value				$       20,00,000
	Issued proceeds	2000000	* 97%	=	$       19,40,000
	Discount on bonds payable				$             60,000
2)
Date	Account Titles and Explanation	Debit	Credit
Jan. 1	Cash	$ 21,00,000
	Bonds Payable		$ 20,00,000
	Premium on bonds payable		$   1,00,000
	(To record issuance of bonds payable)
Working:
	Par Value				$       20,00,000
	Issued proceeds	2000000	* 105%	=	$       21,00,000
	Discount on bonds payable				$          1,00,000