Answer :
The journal entry to record the issuance of bond for Max Company is:Account TitleDebitCreditCash98250Bonds Payable97500Premium on Bonds Payable2500Explanation:
The given problem states that Max Company issues $100,000, 8%, 10-year bonds at 98.5 on July 1, 2019, and interest is paid on July 1 and January 1. Therefore, the company receives 98.5% of $100,000, which amounts to $98,500. The remaining amount of $1,500 ($100,000 - $98,500) is the premium on bonds payable.The journal entry to record the issuance of bond for Max Company is:DebitCash98250CreditBonds Payable97500CreditPremium on Bonds Payable2500Debit Cash $98,250 (To record cash received on the issue of bonds)Credit Bonds Payable $97,500 (To record bonds issued at a discount)
Credit Premium on Bonds Payable $2,500 (To record the premium on bonds payable)Therefore, the journal entry to record the issuance of bond will be Debit Cash $98,250, Credit Bonds Payable $97,500, Credit Premium on Bonds Payable $2,500.
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The journal entry to record the issuance of bonds by Max Company on July 1, 2019, at a price of 98.5 would be as follows:
Date: July 1, 2019
Debit: Cash (98.5% of $100,000)
Credit: Bonds Payable (face value of $100,000)
Explanation:
The company receives cash from the issuance of bonds, which is recorded as a debit to the Cash account. The amount of cash received is calculated by multiplying the face value of the bonds ($100,000) by the issue price (98.5% or 0.985). On the other side, the company creates a liability called Bonds Payable, which represents the total face value of the bonds issued.
The journal entry would be as follows:
Date: July 1, 2019
Debit: Cash ($100,000 x 0.985) = $98,500
Credit: Bonds Payable ($100,000)
Please note that the specific account names used may vary depending on the company's chart of accounts and accounting practices. It's always recommended to consult the company's specific accounting guidelines or an accountant for accurate and tailored journal entries.
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