Home › ACCA › Financial Accounting › Bonds Payable › A corporation issues $100,000 of bonds at a $3,6…
A corporation issues $100,000 of bonds at a $3,679 discount. What is the journal entry to record the issuance?
ADebit Cash $100,000; credit Bonds Payable $100,000
BDebit Cash $96,321 and Discount on Bonds Payable $3,679; credit Bonds Payable $100,000
CDebit Cash $103,679; credit Bonds Payable $100,000 and Premium on Bonds Payable $3,679
DDebit Cash $96,321; credit Bonds Payable $96,321
Answer & Solution
Correct answer: B. Debit Cash $96,321 and Discount on Bonds Payable $3,679; credit Bonds Payable $100,000
1. Cash received is face minus discount: \$100{,}000 - \$3{,}679 = \$96{,}321 (debit Cash).
2. The discount is recorded in a contra-liability account: debit Discount on Bonds Payable $3,679.
3. Bonds Payable is credited at full face amount: $100,000.
4. Option C describes a premium issuance, the opposite scenario; option D ignores the discount account.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Bond Transactions When Contract Rate is Less Than Market Rate", p.226_
Related questions
A corporation has $600,000 of Bonds Payable and a $30,000 debit balance in Discount on BonA five-year bond issued at a $60,000 premium amortizes $1,000 per month. If the bond is isWhen a corporation redeems a bond early at a price above its carrying amount, the resultinA bond with a $100,000 face amount and a $3,000 credit balance in Premium on Bonds PayableA bond with a $100,000 face amount and a $3,000 debit balance in Discount on Bonds PayableA bond has a Bonds Payable credit balance of $100,000 and a Premium on Bonds Payable crediA $3,769 premium on five-year bonds is amortized straight-line. The annual amortization enA corporation issues $100,000 of bonds at a $3,769 premium. What is the journal entry to r