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17 August, 22:54

Crane Company issues $310,000, 20-year, 7% bonds at 102. Prepare the journal entry to record the sale of these bonds on June 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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  1. 17 August, 23:07
    0
    The Journal entry is as follows:

    On June 1, 2022

    Cash A/c Dr. $316,200

    To Bonds payable A/c $310,000

    To Premium on Bonds Payable A/c $6,200

    (To record the sale of these bonds on June 1, 2022)

    Workings:

    cash = $310,000 * (102 : 100)

    = $310,000 * 1.02

    = $316,200

    Premium on Bonds Payable = $316,200 - $310,000

    = $6,200
  2. 17 August, 23:16
    0
    June 1st 2022

    Dr Cash 316,200

    Cr Bond Payable 310,000

    Cr Premium on Bond payable 6,200

    (to record bond issuance)

    Explanation:

    As at issuance, we have:

    + Cash receipt from bond issuance = 310,000 x 102% = $316,200. So, Cash account goes up (Dr) by $316,200 to reflect the change.

    + Bond payable record at the par-value of total bonds issued or $310,000. So, Bond Payable goes up (Cr) by $310,000 to record the bond liability.

    + As bond is issued at premium (at 102); a Premium on Bond account is credited at the amount of $6,200; which is decided is the different between the amount debit to cash account and the amount credit to bond payable account (316,200 - 310,000).
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