To prepare the journal entry for the bond issuance on January 1, 2020, we need to account for the following:

1. Cash Received: The cash amount received from the bond issuance is $571,310.
2. Bond Payable: The bond has a par value of $630,000, which needs to be credited because it represents a liability.
3. Discount on Bonds Payable: The difference between the par value and the cash received ($630,000 - $571,310 = $58,690) is recorded as a "Discount on Bonds Payable," which is a contra-liability account.

Journal Entry:

• Date: January 1, 2020
  • Debit: Cash: $571,310
  • Debit: Discount on Bonds Payable: $58,690
  • Credit: Bonds Payable: $630,000

This entry reflects the issuance of bonds at a discount.

Would you like a detailed explanation of the bond discount amortization or have any specific questions about this process?

Follow-up Questions:

1. What is the purpose of the "Discount on Bonds Payable" account in this journal entry?
2. How is the effective interest method used to amortize the bond discount?
3. What would the journal entry look like for the first interest payment?
4. How does the market interest rate affect the issue price of bonds?
5. What are the financial statement impacts of this bond issuance?

Tip:

The effective interest method allocates the bond discount over the bond's life based on the market interest rate, ensuring the expense matches the economic reality of the bond's cost.