Question

a company borrows $120,000 by selling 10%, 10-year bonds. interest is payable quarterly. at the time the bonds are sold, what is the amount of liability recorded?

Answer 1

The amount of the liability recorded is $120,000.

Step-by-step explanation:

The following journal entry would be recorded to record the issuance of the bonds:

Cash 120,000

Bonds Payable 120,000

The Bonds Payable account is a liability account that represents the amount of money that the company owes to bondholders. The Cash account is an asset account that represents the cash that the company received from the sale of the bonds.