Yanik Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 97. The journal entry to record the issuance will show a
A) debit to Cash of $4,000,000.
B) debit to Discount on Bonds Payable for $120,000.
C) credit to Bonds Payable for $3,880,000.
D) credit to Cash for $3,880,000.

Question

Quizplus · Accepted Answer

The bonds are issued at 97, meaning they are issued at 97% of their face value. The discount on bonds payable is calculated as the difference between the face value ($4,000,000) and the cash received ($3,880,000), which is $120,000.

Yanik Corporation Issues 4,000, 10-Year, 8%, $1,000 Bonds Dated January