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13 February, 07:51

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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  1. 13 February, 08:13
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    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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