Question

1. Begin's Corporation incurred the following costs when it issued bonds: (1)

printing and engraving costs $25,000; (2) legal fees, $69,000; and (3) commissions paid to underwriter, $70,000. What accounting treatment could be

given to these costs?

Answer 1

Answer :

1. Begin's Corporation incurred the following costs when it issued bonds:

(1) printing and engraving costs $25,000; (2) legal fees, $69,000; and (3) commissions paid to underwriter, $70,000.

The accounting treatment could be given to these costs as :

The accounting treatment that is done to the given costs of bonds issued is that these costs would be charged to the cost of bonds issued.
These costs will increase the bond price.
These costs will then be credited to profit and loss account.

The following accounting treatment of the given costs would be done :

a. Printing and engraving A/c debit $25,000
To bond issued A/c $25,000

b. Legal fees A/c debit $69,000
To bond issued A/c $69,000

c. Commission charged A/c debit $70,000
To bond issued A/c $70,000

d. Profit and loss A/c debit $164,000
To Printing and engraving A/c. $25,000
To Legal fees A/c. $69,000
To Commission paid A/c. $70,000