Bonds with a face amount $1,000,000 are sold at 106.The journal entry to record the issuance is

Question

Quizplus · Accepted Answer

The journal entry to record the issuance of bonds at a premium includes debiting Cash for the amount received (106% of $1,000,000 = $1,060,000) and crediting Bonds Payable for the face amount of the bonds ($1,000,000) and the premium on bonds payable for the difference between the cash received and the face amount ($60,000). Therefore, the correct journal entry is: 
Debit Cash $1,060,000 
Credit Bonds Payable $1,000,000 
Credit Premium on Bonds Payable $60,000
The correct choice is B.

Bonds with a Face Amount $1,000,000 Are Sold at 106