### Journal Entry for Issuance of Bonds**Scenario:**On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $530,000. Journalize the entry for the issuance of the bonds.**Instructions:**If an amount box does not require an entry, leave it blank.**Journal Entry:**Here is the structured format to record the transaction:| Date | Account Titles and Explanation | Debit | Credit ||------------|--------------------------------|---------|---------|| [Date] | Cash | 530,000 | || [Date] | Bonds Payable | | 500,000 || [Date] | Premium on Bonds Payable | | 30,000 |**Explanation:**- **Cash:** The company receives $530,000 in cash.- **Bonds Payable:** The company is obliged to pay back $500,000 at the end of the bond term.- **Premium on Bonds Payable:** The company receives more cash than the face value of the bond, which is recorded as a premium. Understanding how to journalize the issuance of bonds helps in accurately reflecting the financial position and obligations of a company.

Given, Face value of bonds = $500,000 Issue price of bonds = $530,000

On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% x 1/2), receiving cash of $530,000. Journalize the entry for the issuance of the bonds. If an amount box does not require an entry, leave it blank.

On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% x 1/2), receiving cash of $530,000. Journalize the entry for the issuance of the bonds. If an amount box does not require an entry, leave it blank.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

### Journal Entry for Issuance of Bonds

**Scenario:**
On the first day of the fiscal year, a company issues a $500,000, 8%, 10-year bond that pays semiannual interest of $20,000 ($500,000 × 8% × 1/2), receiving cash of $530,000. Journalize the entry for the issuance of the bonds.

**Instructions:**
If an amount box does not require an entry, leave it blank.

**Journal Entry:**
Here is the structured format to record the transaction:

| Date | Account Titles and Explanation | Debit | Credit |
|------------|--------------------------------|---------|---------|
| [Date] | Cash | 530,000 | |
| [Date] | Bonds Payable | | 500,000 |
| [Date] | Premium on Bonds Payable | | 30,000 |

**Explanation:**
- **Cash:** The company receives $530,000 in cash.
- **Bonds Payable:** The company is obliged to pay back $500,000 at the end of the bond term.
- **Premium on Bonds Payable:** The company receives more cash than the face value of the bond, which is recorded as a premium.

Understanding how to journalize the issuance of bonds helps in accurately reflecting the financial position and obligations of a company.

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