Question

On January​ 1, 2018​, Micheal Unlimited issues 12​%, 20​-year bonds payable with a face value of $ 180 comma 000. The bonds are issued at 103 and pay interest on June 30 and December 31. ​(Assume bonds payable are amortized using the​ straight-line amortization​ method.) Read the requirements LOADING.... Requirement 1. Journalize the issuance of the bonds on January​ 1, 2018. ​(Record debits​ first, then credits. Select explanations on the last line of the journal​ entry.)

Answer 1

Answer:

Jan 1, 2018       Cash                                                         $185400

                                Premium on Bond Payable                 $5400

                                Bonds Payable                                  $180000    

                       ( Issued bond at premium)

Explanation:

Bond is liability that required to be paid after certain period of time. The company issue bonds either on premium, par and discount. Micheal unlimited issue the bond on the premium that indicates that company will receive more amount on the issuance of bond compare to its par value. Therefore, The entry reflects the position cash company generate using the Premium method of accounting while premium will amortized over the period using the straight line amortization method.