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Sunland Company issued $580,000, 6%, 20-year bonds on January 1, 2020, at 103. Interest is payable annually on January 1. Sunland uses straight-line amortization for bond premium or discount.
a. Prepare the journal entry to record the issuance of the bonds.

Respuesta :

Answer:

The journal entry for the bond issuance is as follows:

Dr Cash                    $597,400 .00

Cr  Bond payable                                $580,000.00

Cr Premium on Bond Issuance               $17,400.00

Explanation:

The bond issue price is $580000*103/100=$597400

Since the bond issue price is greater than the face value of the bond, the bond is said to be issued at a premium.

Cash increased by $597,400 due to the bond issuance, whereas the bond issuance price is $17400 greater than the bond par value.As a result, the appropriate entries would to debit cash account with the increase in cash,while the increase in obligation-bond payable is credited with the par value of $580,000.00, with balance representing the premium also credited to bond premium account.

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