Answer :
The appropriate journal entry when the bonds were issued on January 1, 20x9, is:
Dr- Cash $97,300
Cr- Discount on Bonds Payable $2,700
Cr- Bonds Payable $100,000
When Crisp’s Computer Co. issued the bonds, they sold for less than their face value due to a price of 97.3. The face value of the bonds is $100,000, and the rate at which they are issued (9%) means the company will pay $9,000 annually in interest (which is 9% of $100,000).
Since the bonds were issued at a price of 97.3, the company received less cash than the face value of the bonds. The price of 97.3 means the company sold the bonds for $97,300, resulting in a discount of $2,700 ($100,000 - $97,300).
Debit Cash: The company receives cash of $97,300, which is the amount they obtained from selling the bonds.
Credit Bonds Payable: The full face amount of the bonds, $100,000, is recorded as a liability, indicating the amount due at maturity.
Credit Discount on Bonds Payable: The discount of $2,700 is recognized as a liability that will be amortized over the life of the bond.
