 In this presentation, we will record the journal entry for the issuance of a bond at par value. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need then can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. You've got the information on the left. We're going to record that into our general journal and then post it to a worksheet on the right to see the effect on the accounting equation and individual accounts. We can see that we have in our worksheet the trial balance, which is going to be in order assets, liabilities, equity, income and expense assets in green liabilities in orange equity in light blue and income expense in dark blue. The debits being represented with non bracketed numbers, the credits with bracketed numbers, debits minus the credits equaling zero. Net income is currently at the 700,000, which is sales and then no expenses at this time. So we're going to issue the bond here. This is going to be the most basic format of issuing a bond and that's going to be where the market rate is equal to the stated rate. If you see this in terms of a book problem, they may just give you the amount that you're going to issue the bond for and tell you that we're going to issue it for the face amount of the bond, or they might indicate that it's going to be issued because the interest rate is the same as the market rate. So in other words, our issue here in terms of our data, we issued a bond which pay interest semi annually. It's a 15 year bond paying semi annual. The face amount is 240 issue price 240. The interest rate on the bond is 8% as well as the market rate. What this means, of course, is that we're going to issue it for the same amount that we're going to be paying back at the end of the bond term. In other words, it's going to be very similar to just a normal loan type of transaction, meaning a normal loan. What happens is we're going to get we're going to get money today. In this case, 240,000. We're going to pay back at the end of the loan period, the 240,000 plus we're going to pay back kind of the rent on using that money, that being the interest at this time, 8%. Why then do we need to say that there's to a face amount and the issue price? And what's the deal with these interest rates? Note that the bond is a little bit different than normal. A note in that if it's pre written, we could still negotiate sometime in the future. And if we do so, the market rate could differ from the bond rate. So if if a problem says that the market rate is different than the bond rate, that will most likely result in us issuing it for some amount other than the face amount. So they could indicate that by saying that the market rate and the stated rate on the bond are different. And the end or they could just tell you because they may not be able to they may not want you to calculate what that difference is. And therefore we'll have to just basically tell you how much we're going to get for the bond and the face amount of the bond. So we'll talk about how to how to calculate the price later right now. If we just record this then pretty basic type of journal which we're just going to say is cash affected. We're going to say yes cash is going up. That's why we're issuing the bond. We're the one selling the bond cash as a debit balance. We're going to increase it by doing the same thing to it. Another debit. So we're going to right click and G3 right click and copy. We'll put that up top in C3 right click and paste 123 just the values. I'm not going to paste the cell and make it green. You could obviously type it in there that would be okay here. We're going to get 240,000 and then we're going to credit something. It's going to be for the same amount. It's only going to be two accounts in this journal entry. So I'm going to do that with a little formula negative of that number. It's going to take that number and flip the sign. You could type in a negative 240 and then that's going to be going to bonds payable. That's what we're going to owe a liability account. So I'm going to copy bonds payable right click in G6 copy. We'll put that in C4 right click and paste 123 going to indent going to the home tab alignment increase indenting and there's our journal entry. The idea here is that there's no premium or discount because one they told us that the two are going to be the same and two because the the stated price is equal to the market price. Also note that it can be confusing that just having the interest just like any kind of note problem. It's we see the interest rate we possibly think well I have to do something with the interest rate. Why would I need it here and note that we don't really need it at this point because they're the same and we'll calculate interest once time passes. So at this point in time because there's no premium or discount the interest rate doesn't do anything for us. We will need it but not until time passes to calculate how much interest will be paid and how much interest has been incurred in terms of an expense. So if we post this then we've got the cash first. Cash is our first account. We're going to go on the middle column in I3 where we will say equals point to that 240,000 making the 270 go up by 242,960,000 bringing us out of balance by that 240 until we record the bond payable which we will do here. We're going to be in the middle column in cell I6 where we say equals point to the 240,000 bringing that zero balance up by 240 to 240 bringing us back in balance here. So note what happens here of course is we've got cash. Cash is going to increase and we increase the liability. No effect on the income statement. We got cash but we didn't earn revenue. We owe it back in the future and of course no expenses, net income remaining the same.