Question

On January 1, Year 1, St. Clair Corporation issues 7%, 11-year bonds with a face amount of $90,000 for $83,497. The market interest rate is 8%. Interest is paid semiannually on June 30 and December 31. Complete the necessary journal entry for the issuance of the bonds by selecting the account names from the drop-down menus and entering the associated dollar amounts.

Answer 1

Answer:

Cash $83,497 (debit)

Investment in Bonds $83,497 (credit)

Explanation:

On Issuance of Bond, the Bond Issuer must recognize the Assets of Cash at the amount of consideration paid by the Bond Holder (Investor).

Also, the Financial Liability : Investment in Bonds must also be recognized by the Issuer at the same amount that the cash has been recognized at.