Question

Pina Colada Corp. has issued three different bonds during 2022. Interest is payable annually on each of these bonds. 1. On January 1, 2022, 1,000, 8%, 5-year, $1,000 bonds dated January 1, 2022, were issued at face value. 2. On July 1, $868,000, 9%, 5-year bonds dated July 1, 2022, were issued at 102. 3. On September 1, $234,000, 7%, 5-year bonds dated September 1, 2022, were issued at 99.

Prepare the journal entry to record each bond transaction at the date of issuance. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Date	Account Titles and Explanation	Debit	Credit
1.	choose a transaction date                                                          Jan. 1July 1Sept. 1	enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
2.	choose a transaction date                                                          Jan. 1July 1Sept. 1	enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
		enter an account title	enter a debit amount	enter a credit amount
3.	Sept. 1	enter an account title for the journal entry on september 1	enter a debit amount	enter a credit amount
		enter an account title for the journal entry on september 1	enter a debit amount	enter a credit amount
		enter an account title for the journal entry on september 1	enter a debit amount	enter a credit amount

Answer 1

1.

Par value of bonds (1,000 x $1,000)= $1,000,000

No.	Date	Account Titles and Explanation	Debit	Credit
1.	January 1, 2022	Cash	$1,000,000
		Bonds payable		$1,000,000
		( To record issuance of bonds)

2.

Par value of bond = $868,000

Issue price = 102

Cash received from issue of bonds = Par value of bond x Issue price

= 868,000 x 102%

= $885,360

Premium on issue of bonds = Cash received from issue of bonds - Par value of bond

= 885,360-868,000

= $17,360

No.	Date	Account Titles and Explanation	Debit	Credit
2.	July 1, 2022	Cash	$885,360
		Premium on bonds payable		$17,360
		Bonds payable		$868,000
		( To record issuance of bonds)

3.

Par value of bonds = $234,000

Issue price = 99

Cash received from issue of bonds = Par value of bond x Issue price

= 234,000 x 99%

= $231,660

Discount on issue of bonds = Par value of bonds- Cash received from issue of bonds

= 234,000-231,660

= $2,340

No.	Date	Account Titles and Explanation	Debit	Credit
3..	September 1, 2022	Cash	$231,660
		Discount on bonds payable	$2,340
		Bonds payable		$234,000
		( To record issuance of bonds)