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On January 1, a company issues bonds dated January 1 with a par value of...

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Accounting

On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $415,437. The journal entry to record the issuance of the bond is:

Multiple Choice

  • Debit Cash $415,437; credit Premium on Bonds Payable $15,437; credit Bonds Payable $400,000.

  • Debit Cash $415,437; credit Discount on Bonds Payable $15,437; credit Bonds Payable $400,000.

  • Debit Cash $400,000; debit Premium on Bonds Payable $15,437; credit Bonds Payable $415,437.

  • Debit Bonds Payable $400,000; debit Bond Interest Expense $15,437; credit Cash $415,437.

  • Debit Cash $415,437; credit Bonds Payable $415,437.

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