Prepare the journal entries for the issuance of the bonds in both QS 10-1 and QS 10-2.

Question:

Prepare the journal entries for the issuance of the bonds in both QS 10-1 and QS 10-2. Assume that both bonds are issued for cash on January 1, 2013.
In QS 10-1
Enviro Company issues 8%, 10-year bonds with a of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 871⁄2. The straight-line method is used to allocate interest expense.
In QS 10-2
Garcia Company issues 10%, 15-year bonds with a of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 1171⁄4. The effective interest method is used to allocate interest expense.
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...