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20 March, 09:46

Prepare the journal entry for the issuance of these bonds. Assume the bonds are issued for cash on January 1, 2017. Garcia Company issues 9.00%, 15-year bonds with a par value of $400,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 7.00%, which implies a selling price of 115 3/4.

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  1. 20 March, 12:48
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    Journal Entries for jan 1, 2017

    Explanation:

    Face value of bond = 400,000

    Proceeds = 400,000 X 1.1575 = 463,000

    Premium = 463,000 - 400,000 = 63,000

    Jan 1, 2017

    Debit Credit

    Cash 463,000

    Premium 63,000

    Bond payable 400,000
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