The entry to record the issuance of bonds at a discount on an interest payment date should include a
A)debit to Cash for the face amount of the bonds.
B)debit to Cash for the face amount of the bonds plus the amount of discount.
C)debit to Cash for the face amount of the bonds minus the amount of discount.
D)credit to Cash for the face amount of the bonds.

Question

Quizplus · Accepted Answer

When bonds are issued at a discount, the amount the issuer gets from the investors is less than the face value. Therefore, the Cash account should be debited for the face amount of the bonds minus the amount of discount. This reflects the net amount of cash received by the company. A debit to the Discount on Bonds Payable account should also be recorded to reflect the initial recognition of the discount. No credit should be made to Cash.

The Entry to Record the Issuance of Bonds at a Discount