BONDS QUESTION:

Torrance Corporation issues $10-$year bonds with a face value of $$12,000,000$ and a stated annual interest rate of $6\%.$ The bonds pay interest ANNUALLY on December $31.$ The market rate of interest on the date of issue is $8\%.$

What journal entry will the company make when they ISSUE the bonds?

HINT: You first need to do the PV calculation to compute how much cash the company receives. Then you can make the journal entry.

Question $1$ options:

Dr$.$ Cash $13,766,421$

Cr$.$ Discount on Bonds Payable $1,766,421$

Cr$.$ Bonds Payable $12,000,000$

Dr$.$ Cash $10,389,580$

Dr$.$ Discount on Bonds Payable $1,610,420$

Cr$.$ Bonds Payable $12,000,000$

Dr$.$ Cash $12,000,000$

Cr$.$ Bonds Payable $12,000,000$

Dr$.$ Cash $10,369,161$

Dr$.$ Discount on Bonds Payable $1,630,839$

Cr$.$ Bonds Payable $12,000,000$