Peak Enterprises issued bonds with a face value of $500,000, receiving cash of $508,000. To record this event, Bonds Payable should be increased for $500,000.

Question

Quizplus · Accepted Answer

This is correct as the Bonds Payable should be recorded at their face value, which is $500,000 in this case. The cash received of $508,000 is higher than the face value because it includes the premium that the bondholders paid to buy the bonds. The premium should be recorded separately as a liability called Premium on Bonds Payable.

Peak Enterprises Issued Bonds with a Face Value of $500,000