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Accounting for Bond Issues - Accounting for Bond Issues A...

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Accounting for Bond Issues A corporation records bond transactions when it issues or retires (buys back) bonds and when bondholders convert bonds into common stock. If bondholders sell their bond investments to other investors, the issuing firm receives no further money on the transaction, nor does the issuing corporation journalize the transaction (although it does keep records of the names of bondholders in some cases). Bonds may be issued at face value, below face value (discount), or above face value (premium). Bond prices for both new issues and existing bonds are quoted as a percentage of the face value of the bond . Face value is usually $1,000. Thus, a $1,000 bond with a quoted price of 97 means that the selling price of the bond is 97% of face value, or $970. Issuing Bonds at Face Value To illustrate the accounting for bonds issued at face value, assume that Devor Corporation issues 100, five-year, 10%, $1,000 bonds dated January 1, 2010, at 100 (100% of face value). The entry to record the sale is: 100,000 Bonds Payable
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