Question

Totito Inc. issues $100,000 face amount bonds at $98,000. The journal Totito Inc. issues $100,000 face amount bonds at $98,000. The journal entry to record the issuance should include:entry to record the issuance should include:

Answer 1

Dr. Cash $98,000

Dr. Discount on Bond $2,000

Cr. Bond payable $100,000

Step-by-step explanation:

If the bonds are issued at a price below the face value then the bonds are issued on a discounted value. The difference between face value and issuance value is known as discount. This discount is recorded separately and amortized over bond's life.

As per given data

Face value = $100,000

Issuance value = $98,000

Discount = $100,000 - $98,000 = $2,000