Hernandez Corporation issues 2,000, 10-year, 8%, $1,000 bonds dated January 1, 2021, at 98.The journal entry to record the issuance will show a

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The journal entry to record the issuance of bonds at a discount includes a debit to Cash for the issue price ($1,960,000) and a credit to Bonds Payable for the face value ($2,000,000). The discount of $40,000 is an additional cost of financing and is recorded as a contra-liability account, Discount on Bonds Payable, which is credited for the amount of the discount. Therefore, the correct journal entry is:

Debit: Cash $1,960,000
Credit: Bonds Payable $2,000,000
Credit: Discount on Bonds Payable $40,000

Hernandez Corporation Issues 2,000, 10-Year, 8%, $1,000 Bonds Dated January