 In this discussion, we will discuss the discussion question of explain the journal entry for issuing bonds at par and the journal entries for interest payments. 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 than 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. So if we see a discussion question like this or an essay question like this, we got a couple things we can break down. First, if we don't know what where to start or where some of these terms are, we could just start with what a bond is, what interest payments are, and then go from there. So obviously what the bond is going to do is if from a company standpoint, we are going to receive payment for the bonds, we're trying to get money, we're trying to finance the company, we're going to receive payment, and then we're going to owe back that money. So the bond is going to be an obligation for us to pay back money. That's going to be the terms of the bond, both the principal of the bond, the power amount, the face amount, plus interest under the agreements of the bond. Now of course, then the interest payments are something that we're going to have to pay back. Interest is going to be something like rent on the money. We got value, we got money, we're using the purchasing power of the money that we received, and we're going to have to pay back kind of like rent on it, which is going to be interest on it. So that's going to be, we can at least break down those. And then what does it mean for the general entry to be issued at par? Well, there's a couple different ways, there's basically three ways that this could happen, that we can issue a bond. One, we can issue it and have it end up with a discount. One, two, is that we can issue it and end up with a premium, or we can issue it at par value. Now par value just means that that would be the easiest thing to do. That would mean that the market, if we issued it at par value, that means that the market rate is equivalent to the rate on the stated rate on the bond. They're the same. And so because of that, because there's no difference between the market rate and the rate on the bond, we don't have to issue it for a premium or a discount, the value of the future cash flow payments is equivalent to the par value or face amount of the bond. So that would actually be the easiest type of thing to happen. Now, and that would be the case usually, if we were just to make the bond, if we made the bond today and we want to issue it today, then we would try probably to make the market rate the same as the stated rate and therefore not have to issue it for a premium or discount. However, if the bond had been made at some date other than the issuing date, then the market rate will probably not be the same as the stated rate and therefore we would have to issue it at a premium or a discount. So the journal entry then just to issue the bond if it's just gonna be issued at par. And that means the interest rate is the same as the market rate is the same as the stated rate. It's a pretty simple journal entry, it's just like a loan. We would debit cash, if it was $1,000 bond, we get $1,000, we debit 1,000. We would credit a bond payable, just like a note payable, but a bond payable. And that would be for the same $1,000 that we're gonna owe back at the end of the time period. So and there's no premium or discount if we issued it at par. Then what would happen is we would typically make, typical bond would be making periodic payments, possibly semi-annual payments that would then be paid according to the terms of the agreement. So and those payments then again would be very straightforward journal entries because we wouldn't have to deal with premiums or discounts. We would simply just make the payment for the stated rate on the bond, times the face amount of the bond, and then if it's semi-annual, we divide by two. We would make it for whatever time period is being covered, six months or a year, whatever the time is covered. And then we would just credit cash and debit the interest expense for that amount. And so that would just happen periodically every six months until the maturity of the bond, if it was a semi-annual bond, we would just be making payments, crediting cash, debiting interest expense. And then at the end of the bond term, then we would have to pay off the principle of the bond, which means if it was a $1,000 bond, it would the bond would be sitting on the books the whole time. Because we're not paying off any of the principle, unlike a loan, unlike an installment note, where we pay off some of the principle. We were only paying the interest the entire time at the end of the maturity of the bond. We would finally pay off the principle of the bond with cash. In this case, if it was a $1,000 bond, we would credit cash and we would debit the bond payable. And then the bond payable would be gone and the bond would be matured and there would be no more bond on the books.