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10 September, 05:11

A company issues $60,000 of 5%, 10-year bonds dated January 1 that pay interest semiannually on each June 30 and December 31. If the issuer accepts $59,000 for the bonds, the issuer will record the sale with a (debit/credit) to Discount on Bonds Payable in the amount of $.

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  1. 10 September, 07:11
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    The issuer will record the sale with a debit to Discount on Bonds Payable in the amount of $1,000.

    Explanation:

    The bond is issued on discount when the issuance price is less than the face value of the bond. The discount is expensed over the bond period until maturity. It is added to the interest expense value to expense it.

    Face Value of the Bond = $60,000

    Issuance Value = $59,000

    Discount amount = $60,000 - $59,000 = $1,000

    Journal Entry Will be as follow

    Dr. Cash $59,000

    Dr. Discount on Bond $1,000

    Cr. Bond Payable $60,000
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