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A company issues bonds with a $100,000 par value, an 8% annual contract rate, semiannual interest payments, and a five year life. The bonds sold for $107,850. The entry to record the issuance of the bonds will include:

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Answer:

                                          Dr.           Cr.

Cash                            $107,850

Bond Payable                               $100,000

Premium on Bond Payable          $7,850

Explanation:

When the Bond is issued on the price more than its face value, the exptra amount from face value received is called Bond Premium.

Bond Face value = $100,000

Issuance price = $107,850

Premium Paid =$107,850 - $100,000 = $7,850

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