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When Patey Pontoons issued 6% bonds on January 1,2016, with a face amount of $600,000, the market yield for bonds of similar risk and maturity was 7%. The bonds mature December 31,2019. Interest is paid semiannualy on June 30 and December 31. Determine the price of the bonds at January 1,2016. Prepare the journal entry to record their issuance by patey on Jan 1,2016

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hyderali230

Answer:

Journal Entry

                             Dr.             Cr.

Jan 1,2016

Cash                $600,000

Bond Payable                     $600,00

Explanation:

On Jan 1, 2016 the bond is issued on the face value, so the straight value of $600,000 recorded as debit to cash and credit to bond payable. The cash is received against the a liability. The interest accrued transaction will be recorded on each year end.

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