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A corporation issues $100,000 of bonds at a $3,769 premium. What is the journal entry to record the issuance?
ADebit Cash $96,231; credit Bonds Payable $100,000 less Discount $3,769
BDebit Cash $100,000; credit Bonds Payable $100,000
CDebit Cash $103,769; credit Bonds Payable $100,000 and Premium on Bonds Payable $3,769
DDebit Cash $103,769; credit Bonds Payable $103,769
Answer & Solution
Correct answer: C. Debit Cash $103,769; credit Bonds Payable $100,000 and Premium on Bonds Payable $3,769
1. Cash received is face plus premium: \$100{,}000 + \$3{,}769 = \$103{,}769 (debit Cash).
2. Bonds Payable is credited at face amount: $100,000.
3. The excess is credited to Premium on Bonds Payable: $3,769.
4. Option A describes a discount, the opposite case; option D omits the premium account entirely.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Bond Transactions When Contract Rate is More Than Market Rate", p.230_
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