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Sunland Company issues $5,000,000, 10-year, 10% bonds at 96, with interest payable annually on January 1. The straight-line method is used to amortize bond discount. Prepare the journal entry to record the sale of these bonds on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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Answer and Explanation:

The journal entry to record the sale of the bond as on Jan 1, 2020 is given below:

Cash $4,800,000 ($5,000,000 × 0.96)

Discount on Bonds payable $200,000  

          To Bonds payable $5,000,000

(Being the sale of the bond is recorded)

Here the cash and discount on bond payable is debited as it increased the assets and decreased the liability and the bond payable is credited as it increase the liability  

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