The following information applies to both questions 77 and 78.
On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis.
-The entry to record the issuance of the bonds would include a credit of
A) $100,000 to Interest Payable.
B) $160,000 to Discount on Bonds Payable.
C) $3,840,000 to Bonds Payable.
D) $160,000 to Premium on Bonds Payable.

Question

Quizplus · Accepted Answer

The bonds were issued at 104, which means they were issued at 104% of their face value. Therefore, the premium on the bonds is calculated as 4% of the face value ($4,000,000 * 0.04 = $160,000), which is credited to Premium on Bonds Payable.

The Following Information Applies to Both Questions 77 and 78