Question

ike issues $110,000 of 9%, three - year bonds dated january 1, 2021, that pay interest semiannually on june 30 and december 31. they are issued at $112,881 when the market rate is 8%.
required:

1. prepare the january 1 journal entry to record the bonds issuance.

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journal entry worksheet
1
record the issue of bonds with a par value of $110,000 on january 1, 2021 at an issue price of $112,881.
note: enter debits before credits.

Explanation:

Step1: Record cash received

When bonds are issued, the cash received is debited. The amount of cash received is the issue price of the bonds, which is $112,881.
$$\text{Debit: Cash } 112,881$$

Step2: Record bond payable at par value

The Bonds Payable account is credited at the par value of the bonds. The par value is $110,000.
$$\text{Credit: Bonds Payable } 110,000$$

Step3: Record premium on bonds payable

The difference between the issue price and the par value is the premium on bonds payable. Calculate the premium: $112,881 - 110,000=2,881$. This is credited to Premium on Bonds Payable.
$$\text{Credit: Premium on Bonds Payable } 2,881$$

Answer:

Date	General Journal	Debit	Credit
	Bonds Payable		110,000
	Premium on Bonds Payable		2,881