Question

On January 1, a company issues bonds dated January 1 with a par value of $220,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $228,930. The journal entry to record the issuance of the bond is: Multiple Choice C Debit Cash $228,930; credit Bonds Payable $228,930 Debit Cash $228,930; credit Premium on Bonds Payable $8,930 credit Bonds Payable $220,000 O Debit Cash $220,000; debit Premium on Bonds Payable $8,930, credit Bonds Payable $228930 o Debit Bonds Payable $220,000, debit Bond Interest Expense $8.930, credit Cash $228,930 o o Debit Cash $228,930; credit Discount on Bonds Payable $8,930, credit Bonds Payable $220,000

Answer 1

B. is correct.

debit cash $228,930, credit premium on bonds payable $8,930, credit bonds payable $220,000.

since bonds are sold for an amount greater than the face value, it can be said that the bond is sold at premium.

The following is the journal entry:

sno	accounts	debit	credit
1	cash a/c	228,930
	........To bonds payable a/c		220,000
	.........To premium on bonds payable a/c		8,930