Clayton Corporation made the following entry in its general journal:

Which of the following describes the above transaction?
A)Clayton records interest expense and amortization of discount on bonds payable.
B)Clayton issues bonds with a face value of $5,400 for $5,000 cash.
C)Clayton records annual interest and amortization of premium on bonds.
D)Clayton redeems callable bonds when the carrying value is $5,400.

Question

Clayton Corporation made the following entry in its general journal:

Which of the following describes the above transaction?
A)Clayton records interest expense and amortization of discount on bonds payable. 
B)Clayton issues bonds with a face value of $5,400 for $5,000 cash. 
C)Clayton records annual interest and amortization of premium on bonds. 
D)Clayton redeems callable bonds when the carrying value is $5,400.

Quizplus · Accepted Answer

The payment of cash and recognition of interest expense (which,in this case,includes the amortization of the discount on bonds payable)decreases assets (by crediting cash),increases liabilities (by crediting discount on bonds payable,a contra-liability account),and increases expenses (by debiting interest expense).

Clayton Corporation Made the Following Entry in Its General Journal