Question

Wakefield Heights sold $6,000,000 of general obligation serial bonds at a 1.5% discount to finance the construction of a new recreation center. Bond issuance costs were 2% of the face amount of the bonds. The entry to record the sale of the bonds in a Capital Projects Fund would be

Answer 1

Answer:

Explanation:

The journal entry is shown below:

Cash A/c Dr $5,790,000

Issuance cost expenses A/c Dr 120,000

Bond discount A/c Dr $90,000

         To Other Financing - Bonds $6,000,000

(Being the sale of bond is recorded and the balancing figure is debited to the cash account)

The issuance of cost expense = $6,000,000 × 2% = $120,000

And, the Bond discount = $6,000,000 × 1.5% = $90,000