Question

On January 1, Year 1, Hanover Corporation issued bonds with a $56,500 face value, a stated rate of interest of 9%, and a 5-year term to maturity. The bonds were issued at 99. Hanover uses the straight-line method to amortize bond discounts and premiums. Interest is payable in cash on December 31 each year.

The journal entry used to record the issuance of the bond and the receipt of cash would be: (Round your answer to the nearest whole dollar amount.)

Answer 1

Journal entry : 

 

Accounts Title and explanation

 

Debit

 

Credit

 

Cash

 

$55,935

 

Discount on Bonds Payable

 

$565

 

Bonds Payable

 

$56,500

 

(Entry to record issuance of bonds at discounts)

 

Working:

 

Bond issue price (56,500/100 x 99)

 

$ 55,935

 

Face value

 

$ 56,500

 

Discount on bonds payable

 

$ 565

 

 

Answer : 

 

Cash

 

$55,935

 

Discount on Bonds Payable

 

$565

 

Bonds Payable

 

$56,500

 

Cash

 

$55,935

 

Discount on Bonds Payable

 

$565

 

Bonds Payable

 

$56,500