Question

Multiple Choice Question 147

Swifty Corporation issues 2600, 10-year, 6%, $1000 bonds dated January 1, 2018, at 99. The journal entry to record the issuance will show a:

A. debit to Cash of $2600000.

B. debit to Cash for $2574000.

C. credit to Discount on Bonds Payable for $26000

D. credit to Bonds Payable for $2626000

Answer 1

• All working forms part of the answer
• Workings:

A	No. of bonds	2600
B	Amount per bond	$                               1,000.00
C=A x B	Face Value of Bonds Payable	$                       2,600,000.00
D	Issue Value of Bonds Payable [$2,600,000 x 99% = Cash received ]	$                       2,574,000.00
E= C - D	Discount on Bonds Payable	$                             26,000.00

• Complete Journal Entry on issuance of Bonds Payable, based on above working

Date	Accounts title	Debit	Credit
01-Jan-18	Cash	$                       2,574,000.00
	Discount on Bonds Payable	$                             26,000.00
	Bonds Payable		$         2,600,000.00
	(Bonds payable issued at discount)

• Hence, the correct answer is Option ‘B’: $ 2,574,000