Cullumber Company issues $3.40 million, 20-year, 9% bonds at 98, with interest payable on December 31. The straight-line method is used to amortize bond discount. Collapse question part (a) Partially correct answer.

Prepare the journal entry to record the sale of these bonds on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 Entry field with correct answer

Dr cash $3,332,000

Dr discount on bonds payable $68,000

Cr bonds payable $3,400,000

Explanation:

The cash proceeds from the bond issuance is 98% of the face value.

Cash proceeds=$3,400,000*98%=$3,332,000.00

This meant that the bond was issued at a discount of $ 68,000.00 ($3,400,000-$3,332,000).

In recording the bond issuance, the cash account is debited with the cash proceeds of $3,332,000 with the discount on bonds payable debited with $68,000 while bonds payable is credited with the face value of $3,400,000