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.