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 Loss 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 a credit to cash of $500,000.

Question

Quizplus · Accepted Answer

Bonds that are issued for less than face value have an issue price of less than 100; this means the bonds sold at a discount.The discount is recorded in a contra-liability account.

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