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20 May, 20:09

On January 1, Parson Freight Company issues 7 %, 10-year bonds with a par value of $2,000,000. The bonds pay interest semiannually. The market rate of interest is 8% and the bond selling price was $1,864,097. The bond issuance should be recorded as: Multiple Choice Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Paysble $2,000,000. Debit Cash $1,864,097; credit Bonds Payable $1,864,097, Debit Cash $2,000,000; credit Bonds Payable $2,000,000 Debit Cash $2,000,000, credit Bonds Payable $1864,097; credit Discount on Bos Payable $135,903. Debit Cash $1864,097; debit Interest Expense $135,903, credit Bonds Payable $2,000,000 Charger Company's most recent balance sheet reports total assets of $27,000,000, total liabilities of $15,000,000 and t debt to equity ratio for the period is (rounded to two decimals) and total equity of $12,000,000.

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  1. 20 May, 23:33
    0
    There are two question in this.

    For the first question, the correct option is

    Debit Cash $1,864,097; Debit Discount on Bonds Payable $135,90; Credit Bonds Payable $2,000,000

    For the second question, the correct option is

    Debt to equity ratio is 1.25

    Explanation:

    Question 1

    The bonds' par value is $2,000,000 and the selling price is $1,864,097. The bonds selling price is less than the par value. Therefore, the bonds are issued at a discount of $135,903 ($2,000,000 - $1,864,097).

    The journal entry to record the issue of the bonds is as follows:

    Debit Cash $1,864,097; Debit Discount on Bonds Payable $135,90; Credit Bonds Payable $2,000,000

    Question 2

    Debt to equity ratio = Total liabilities / Total equity = $15,000,000 / $12,000,000 = 1.25

    Debt to equity ratio is 1.25
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