Question

on january 1, 2025, military credit union (mcu) issued 7%, 20 - year bonds payable with face value of $1,100,000. these bonds pay interest on june 30 and december 31. the issue price of the bonds is 102. journalize the following bond transactions.

journalize the bond transactions.

(assume bonds payable are amortized using the straight - line amortization method. record debits first, then credits. select explanations on the last line of the journal entry. round your answers to the nearest whole dollar.)

a. journalize the issuance of the bonds on january 1, 2025

Explanation:

Step1: Calculate the issue price

The face value of the bonds is $1,100,000. The issue price is 102% of the face value.

$$ \text{Issue price}=1,100,000\times1.02 = 1,122,000 $$

Step2: Determine the accounts involved

When bonds are issued at a premium (issue price > face value), Cash is debited for the amount received (issue price), Bonds Payable is credited for the face value, and Premium on Bonds Payable is credited for the difference (premium).

$$ \text{Premium}=1,122,000 - 1,100,000=22,000 $$

Answer:

Date	Accounts and Explanation	Debit	Credit
	Bonds Payable		$1,100,000
	Premium on Bonds Payable		$22,000
	(To record issuance of bonds at a premium)