Tinhua Corporation issues 5,000, 10-year, 6%, $1,000 face value bonds dated January 1, 2013 at 95. The journal entry to record the issue of the bonds will include a

Question

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The issue price of the bonds is 95% of their face value, which means the company received $4,750,000 ($1,000 x 5,000 x 0.95) in cash. Therefore, the journal entry to record the bond issue will include a credit to Bonds Payable for $4,750,000. There is no entry for Interest Expense at this point because no interest has been accrued or paid yet. The entry would look like this:

Debit Cash $4,750,000
Credit Bonds Payable $4,750,000

Tinhua Corporation Issues 5,000, 10-Year, 6%, $1,000 Face Value Bonds