Question

Sandra Calaman: Attempt 1 Question 8 (1 point) On January 1, Year 1, Burton Corporation issued bonds with a face value of $200,000 for $196,000 cash.: Which of the following correctly describes the related transaction? A) Burton issued bonds at 102. B) Burton issued bonds at 98. C) Burton issued bonds at a $4,000 premium. D) Burton signed a note payable for $196.000. Ouestion 9 (1 point)

Answer 1

Issuance of bonds of face value of $200,000 at $196,000 means that the bonds are issued at a discount of $4,000 (because the cash proceeds are less than the face value). Also, the issue price of the bond is $196,000 / 2,000 = $98

option A) is incorrect because the bonds are not issued at 102, instead they are issued at 98

option C) is incorrect because the bonds are not issued at a premium of $4,000, instead they are issued at a discount of $4,000

option D) is incorrect because the comoany received cash in issuance of bonds payable. there is no note payable in the transaction.

option B) is correct because the bonds are issued at a price of $196,000 / 2,000 = $98

hence, the correct answer is option B) Burton issued bonds at 98.