Garcia Company issues 10%, 15-year bonds with a par value 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 117 ¼.Prepare the journal entry for the issuance of these bonds for cash on January 1.

To record the issuance of the bonds, we need to calculate the selling price and then prepare the journal entry.

### Step 1: Calculate the Selling Price of the Bonds
The selling price is based on a percentage of the par value. Here, the bonds are sold at **117 ¼**, or **117.25%** of the par value.

\[
\text{Selling Price} = \text{Par Value} \times \frac{117.25}{100}
\]
\[
\text{Selling Price} = 240,000 \times 1.1725 = 281,400
\]

### Step 2: Journal Entry for Bond Issuance

On January 1, the journal entry would be:

| Date          | Account Titles         | Debit ($)  | Credit ($) |
|---------------|------------------------|------------|------------|
| January 1     | Cash                   | 281,400    |            |
|               | Premium on Bonds Payable| 41,400     |            |
|               | Bonds Payable           |            | 240,000    |

### Explanation:
- **Cash** is debited for the amount received from the bond issuance.
- **Bonds Payable** is credited for the par value of the bonds.
- **Premium on Bonds Payable** is credited for the excess of the selling price over the par value, which represents the bond premium.

Would you like more details about the journal entry process or bond premiums?

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### Related Questions:
1. How is the premium on bonds payable amortized over time?
2. What is the effect of bond premium on the interest expense?
3. How would the journal entry differ if the bonds were issued at a discount?
4. What happens if the market rate of interest changes after bond issuance?
5. How do semiannual interest payments affect the bond pricing?

### Tip:
Bond premiums reduce the interest expense over the life of the bond, as they represent additional cash received upfront.

Garcia Company issues 10%, 15-year bonds with a par value 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 117 ¼. Prepare the journal entry for the issuance of these bonds for cash on January 1.

Learn how to prepare the journal entry for Garcia Company’s issuance of 10%, 15-year bonds at a selling price of 117 ¼. The par value is $240,000, and the selling price is $281,400. This solution covers bond pricing, premium on bonds payable, and appropriate journal entries. Suitable for college-level accounting students.

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