Your company issues $500,000 in bonds at an issue price of 98. The company will record:
A) a debit of $490,000 to cash, a debit of $10,000 to a contra-liability account to reflect the discount, and a credit of $500,000 to bonds payable.
B) a debit of $490,000 to cash, a debit of $10,000 to a contra-asset account to reflect the discount, and a credit of $500,000 to bonds payable.
C) a debit of $500,000 to bonds payable, a credit of $10,000 to a contra-liability account to reflect the discount, and a credit to cash of $490,000.
D) a debit of $490,000 to bonds payable, a debit of $10,000 to a contra-asset account to reflect the discount, and

Question

Quizplus · Accepted Answer

The bonds are issued at 98% of face value, so cash received is $490,000. The $10,000 difference is recorded as a discount on bonds payable, a contra-liability account, and bonds payable is credited for the full $500,000.

Your Company Issues $500,000 in Bonds at an Issue Price