Question

. Calculate how much Markway is able to borrow if each bond is sold at a premium of $30.
$

2. Calculate how much Markway is able to borrow if each bond is sold at a discount of $10.
$

3. Calculate how much Markway is able to borrow if each bond is sold at 92% of par.
$

4. Calculate how much Markway is able to borrow if each bond is sold at 103% of par.
$

Feedback

1 & 2. Calculate the issue price for each bond then consider the total number of bonds to calculate total proceeds.

3 & 4. The par value is the same as face value.

5. Assume that the bonds are sold for $975 each. Prepare the entry to recognize the sale of the 750 bonds.

	Cash
	Discount on Bonds Payable
	Bonds Payable
	Record issuance of bonds at discount

Feedback

5. When bonds are issued, any premium or discount is recorded in a separate valuation account.

6. Assume that the bonds are sold for $1,015 each. Prepare the entry to recognize the sale of the 750 bonds.

	Cash
	Premium on Bonds Payable
	Bonds Payable
	Record issuance of bonds at premium

Answer 1

Question Points	Issue Price	No.of Total Bonds	Total Borrowing
1. Bond sold at Premium of $ 30	1,030	750	772,500
2. Bond sold at Discount of $ 10	990	750	742,500
3. Bond sold at 92 % of Par	920	750	690,000
4. Bond sold at 103 % of Par	1,030	750	772,500
5. 750 Bond sold @ 975/- each
Recognition Entry as per following:	Amount
Cash Account……..Debit	731,250
Discount on Bonds Payable……….Debit	18,750
Bonds Payable…………Credit	(750,000)
6. 750 Bond sold @ 1015/- each
Recognition Entry as per following:	Amount
Cash Account……..Debit	761,250
Premium on Bonds Payable……….Credit	(11,250)
Bonds Payable…………Credit	(750,000)

Assumptions:-	Amount/Quantity
1. Face Value/Par Value of Bond	1,000
2. Total Bonds is equal to Bond sale in Point No.5 of the question	750