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18 May, 08:36

On February 1, 2020, Blue Corporation issued 3,400 shares of its $5 par value common stock for land worth $26,700. Prepare the February 1, 2020, journal entry.

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  1. 18 May, 08:53
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    Dr. Cr.

    February 1, 2020

    Cash $26,700

    Bond Premium $9,700

    Bond Payable $17,000

    Explanation:

    Any amount paid / received over the face value of the bond is called premium of bond. It is due to that the stated interest rate of bond is higher than the market rate.

    Face value of bond = 3,400 x $5 = $17,000

    Premium on bond = $26,700 - $17,000 = $9,700

    Cash received will be debited to cash account. Bond payable is a liabilities. Bond premium is also a liability account which will amortize over the bond life and reduce the interest payable amount of each period.
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