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17 October, 17:28

Tano issues bonds with a par value of $180,000 on January 1, 2016. The bonds' annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $170,862. 1. What is the amount of the discount on these bonds at issuance

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  1. 17 October, 17:55
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    The discount on the bonds issuance is $9,138.00

    Explanation:

    discount on bonds at issuance=bonds face value-bonds cash proceeds

    bonds face value is $180,000

    bonds cash proceeds = $170,862

    Discount on bonds at issuance=$180,000-$170,862

    Discount on bonds at issuance=$9,138.00

    The necessary journal entries to record the bonds issuance are follows:

    Dr Cash $170,862.00

    Dr discount on bonds issue $9,138.00

    Cr Bonds payable $180,000

    The discount on the bonds would amortized over relevant years
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