A company issues $60,000 of 5%, 10-year bonds dated January 1 that pay interest semiannually on each June 30 and December 31. If the issuer accepts $59,000 for the bonds, the issuer will record the sale with a (debit/credit) to Discount on Bonds Payable in the amount of $.

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Business

Jayda Clarke

6 May, 00:14

A company issues $60,000 of 5%, 10-year bonds dated January 1 that pay interest semiannually on each June 30 and December 31. If the issuer accepts $59,000 for the bonds, the issuer will record the sale with a (debit/credit) to Discount on Bonds Payable in the amount of $.

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Lowe · Answer 1

The issuer will record the sale with a debit to Discount on Bonds Payable in the amount of $1,000.

Explanation:

The bond is issued on discount when the issuance price is 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.

Face Value of the Bond = $60,000

Issuance Value = $59,000

Discount amount = $60,000 - $59,000 = $1,000

Journal Entry Will be as follow

Dr. Cash $59,000

Dr. Discount on Bond $1,000

Cr. Bond Payable $60,000