Mercury Corporation issues a $3,000,000, 10-year, 8% bond dated January 1 at 103. The journal entry to record the issuance will include a:
A) credit to cash for $3,090,000.
B) debit to cash for $3,000,000.
C) credit to premium on bonds payable for $90,000.
D) credit to bonds payable for $3,090,000.

Question

Quizplus · Accepted Answer

The bond is issued at 103, which means it is issued at 103% of its face value. The premium on bonds payable is the difference between the cash received ($3,090,000) and the face value of the bond ($3,000,000), which is $90,000.

Mercury Corporation Issues a $3,000,000, 10-Year, 8% Bond Dated January