Asked by Brittany Moncrief on May 12, 2024
Verified
The journal entry to record the issuance of the bond is:
A) Debit Cash $400,000; debit Discount on Bonds Payable $16,207; credit Bonds Payable $416,207.
B) Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000.
C) Debit Bonds Payable $400,000; debit Bond Interest Expense $16,207; credit Cash $416,207.
D) Debit Cash $383,793; debit Premium on Bonds Payable $16,207; credit Bonds Payable $400,000.
E) Debit Cash $383,793; credit Bonds Payable $383,793.
Issuance
The process of distributing new or existing securities for sale to investors.
Journal Entry
A record in accounting that notes the details of a financial transaction in terms of debits and credits to the accounts.
Discount on Bonds Payable
The difference between the face value of a bond and its selling price when the bond is sold for less than its face value.
- Gain proficiency in entering various bond transactions in journal entries, including the issuance, interest payments, and amortization.
Verified Answer
AD
Anthony DolceMay 15, 2024
Final Answer :
B
Explanation :
The journal entry to record the issuance of bonds includes debiting Cash for the amount received ($383,793), debiting Discount on Bonds Payable for the difference between the par value and the selling price ($16,207), and crediting Bonds Payable for the par value ($400,000). This entry reflects the fact that the market rate of interest is higher than the contract rate, resulting in a discount on the bonds.
Learning Objectives
- Gain proficiency in entering various bond transactions in journal entries, including the issuance, interest payments, and amortization.
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