On January 1,Year 1,Burton Corporation recorded the following journal entry:

Which of the following correctly describes the related transaction?

Question

On January 1,Year 1,Burton Corporation recorded the following journal entry:

Which of the following correctly describes the related transaction?

Quizplus · Accepted Answer

Proceeds of $196,000 = Face value of $200,000 × Issue price
Issue price = $196,000 ÷ $200,000 = 98
A $200,000 bond issued at 98 will be recorded as a debit (increase)to cash for $196,000,the issue price,a debit (increase)to discount on bonds payable (a contra liability)for $4,000,and a credit (increase)to bonds payable for $200,000,the bond's face value.

On January 1,Year 1,Burton Corporation Recorded the Following Journal Entry