Sunland Company issued $530,000, 15-year, 6% bonds at 96. (a) Prepare the journal entry to record the sale of these bonds on January 1, 2022. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Question

Elizabeth Oneill

Business

7 October, 04:12

Sunland Company issued $530,000, 15-year, 6% bonds at 96. (a) Prepare the journal entry to record the sale of these bonds on January 1, 2022. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

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Nathalia Floyd · Answer 1

January 1, 2022

Dr. Cash $508,800

Dr. Discount on Bond $21,200

Cr. Bond Payable $530,000

Explanation:

The bond is issued on discount when the bond issuance proceeds are less than the face value of the bond. The discount is expensed over the bond period until maturity. It is added to the interest expense value to expense it.

Issuance value = $530,000 x 96% = $508,800

Discount on the bond = Face value - Issuance value = $530,000 - $508,800 = $21,200