Ayayai Corp. issued 1,000 5%, 5-year, $1,000 bonds dated January 1, 2022, at face value. Interest is paid each January 1. (a) Prepare the journal entry to record the sale of these bonds on January 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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Business

Freddy Landry

8 January, 22:05

Ayayai Corp. issued 1,000 5%, 5-year, $1,000 bonds dated January 1, 2022, at face value. Interest is paid each January 1. (a) Prepare the journal entry to record the sale of these bonds on January 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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Joyce Wilcox · Answer 1

Dr cash $1,000,000

Cr Bonds payable $1,000,000

Being issuance of bonds at face value

Explanation:

The cash realized from the bond issue is $ 1,000,000.00 (1000*$1000) since the bonds were issued at par value of $1000 each.

The correct accounting entries for the bonds issuance would a debit to cash account of $1,000,000 and a credit to bonds payable account for the same amount.

The rationale for this is that cash increased, hence the asset account is debited and liability, bonds payable also increased.