Torrey Corporation issued $1,000,000 of ten-year, 10 percent bonds payable dated January 1, 2009. The market rate of interest at that time was 11 percent. The journal entry to record this transaction will include a:

Question

Quizplus · Accepted Answer

The bonds were issued at a market rate higher than the coupon rate, meaning they were issued at a discount. Therefore, the journal entry will include a debit to Bond Discount to account for the difference between the face value and the cash received.

Torrey Corporation Issued $1,000,000 of Ten-Year, 10 Percent Bonds Payable