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This post addresses a journal entry for a bond sale.

Lakeland Homebuilders recently sold $400,000 worth of 8% semiannual bonds at 95 to J. Ferguson Underwriting. What would the journal entry look like to record the sale of the bonds?

Entry Account&Description DEBIT CREDIT
1. Bonds Payable 400,000
Cash 400,000

2. Cash 380,000
Discount on Bonds Payable 20,000
Bonds Payable 400,000

3. Bond Interest Expense 15,200
Cash 15,200

4. Cash 400,000
Premium on Bonds Payable 12,000
Bonds Payable 380,000
Bond Interest Expense 32,000

CHOICES..
A. Item 3 is the correct entry
B. Item 2 is the correct entry
C. Item 4 is the correct entry
D. Item 1 is the correct entry

Solution Preview

2. Cash 380,000
Discount on Bonds Payable 20,000
Bonds Payable 400,000

This is the correct answer ...

Solution Summary

The solution provides the correct journal entry for Lakeland Homebuilders to record the sale of the associated bonds.

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