Oasis Company received $391,800 for bonds having a total face value of $400,000. What journal entry would be made to record this bond issuance?
A)Debit Cash for $391,800,debit Discount on Bonds Payable for $8,200,and credit Bonds Payable for $400,000
B)Debit Cash for $400,000,credit Discount on Bonds Payable for $8,200,and credit Bonds Payable for $391,800
C)Debit Cash for $400,000 and credit Bonds Payable for $400,000
D)Debit Cash for $400,000,credit Bonds Payable for $391,800,and credit Interest Payable for $8,200

Question

Quizplus · Accepted Answer

The bonds were issued at a discount because the proceeds were less than the face value.The amount of the discount $8,200 ($400,000 − $391,800)is recorded in a contra-account to the Bonds Payable liability.

Oasis Company Received $391,800 for Bonds Having a Total Face