Carla Vista Company journal entry
Carla Vista Company issued $540,000 of 5-year, 7% bonds at 99 on January 1, 2022. The bonds pay interest annually.
Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Sample Solution
Dr. Cash 539,600
Cr. Bond Payable 540,000
Explanation:
The journal entry to record the issuance of the bonds is a two-part transaction that records both the receipt of cash and the creation of a bond payable liability. The amount received for the bonds (cash) will be less than their face value because they are sold at a discount or premium. In this case, since the bonds were issued at 99%, we need to multiply their face value by 0.99 to get the cash received: 540,000 x 0.99 = $539,600.
Therefore, the journal entry would consist of debiting Cash for $539,600 and crediting Bond Payable for $540,000 as shown above.