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22 April, 11:38

On December 31, 2019, Spearmint, Inc., issued $450,000 of 9 percent, 3-year bonds for cash of $461,795. Prepare the necessary journal entry for Spearmint, Inc.

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  1. 22 April, 12:29
    0
    Dr Cash $461,795

    Cr Bonds payable $450,000

    Cr Premium on bonds payable $11,795

    Explanation:

    The journal entries to record the issue of bonds for the proceeds of $461.795 is to debit the cash amount as the cash has increased and credit would $450,000 in bonds payable account and the balance of $11,795 ($461,795-$450,000) is the premium on the issue and it is credited to premium on bonds account.

    The bonds payable is credited because the $450,000 represents obligation owed to bondholders
  2. 22 April, 14:20
    0
    Dr Cash for $461,795,

    Cr Premium on Bonds Payable for $11,795

    Cr Bonds Payable for $450,000

    Explanation:

    Journal entries

    Dr Cash for $461,795,

    Cr Premium on Bonds Payable for $11,795

    Cr Bonds Payable for $450,000

    (Issue price of $461,795 - par value of $450,000) = $11,795
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