Question

Four thousand bonds with a face value of $1,000 each, are sold at 104. The entry to record the issuance is:____.

A. Cash 4,080,000
Bonds Payable 4,080,000
B. Cash 4,080,000
Premium on Bonds Payable 80,000
C. Bonds Payable 4,000,000
Cash 4,080,000
D. Discount on Bonds Payable 80,000
Bonds Payable 4,000,000
E. Cash 4,000,000
Premium on Bonds Payable 80,000
Bonds Payable 4,080,000

Answer 1

Answer and Explanation:

The journal entry to record the issuance is given below:

Cash (4000 × 1000 × 104%) Dr. $4,160,000

To Premium on Bonds Payable $160,000

To Bonds Payable (4000 × 1000) $4,000,000

(being the issuance of the bond is recorded)

Here the cash is debited as it increased the assets, and the rest of the two accounts are credited as it increased the liabilities