Question

On January 1, Creed Boxing 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:___________

Answer 1

Answer:

Debit Cash $1,864,097; debit Interest Expense $135,903; credit Bonds Payable $2,000,000.

Explanation:

Cash $1,864,097

Discount on Bonds Payable $135,903

      To Bonds Payable $2,000,000

(Being the issuance of the bond is recorded)

For recording this we debited the cash it increased the assets and the same time it also increased the liabilities so the bond payable is credited and the balancing figure is debited to discount on bond payable