Your company issues $500,000 in bonds at a price of 98.The journal entry used to record the issuance will include a debit to:
A) Cash for $490,000, a debit to Discount on Bonds Payable for $10,000, and a credit to Bonds Payable for $500,000.
B) Bonds Payable for $500,000, a credit to Discount on Bonds Payable for $10,000, and a credit to Cash for $490,000.

Question

Quizplus · Accepted Answer

When bonds are issued at a discount, the cash received is less than the face value of the bonds. The difference between the face value and the cash received is considered a discount on the bonds payable. Therefore, the journal entry to record the issuance of bonds at a discount would debit Cash for the amount received (in this case, $490,000), debit Discount on Bonds Payable for the amount of the discount (in this case, $10,000), and credit Bonds Payable for the face value of the bonds (in this case, $500,000).

Your Company Issues $500,000 in Bonds at a Price of 98.The