Hillside issues $4,000,000 of 6%, 15-year bonds dated january 1, 2016, that pay interest semiannually on june 30 and december 31. the bonds are issued at a price of $4,895,980. required: 1. prepare the january 1, 2016, journal entry to record the bonds’ issuance
(DR) Cash $4,895,980; (CR) Bonds Payable $4,000,000; (CR) $895,980
The problem only requires the journal entry of the issuance of the bonds on January 1, 2016.
Simply debit "Cash" for the amount of the price which is $4,895,980.
Then ALWAYS credit "Bonds Payable" on its issued value of $4,000,000.
Now, since the cash price is greater than the issued value, the difference of $895,980 will be called as "Premium on Bonds Payable" and it will be credit.
So the entry would look like this:
(DR) Cash $4,895,980
(CR) Bonds Payable $4,000,000
(CR) Premium on Bonds Payable $895,980