Bonds with a face amount $1,000,000, are sold at 109. The entry to record the issuance is
Group of answer choices
Debit: Cash 1,000,000 Debit: Premium on Bonds Payable 90,000 Credit: Bonds Payable 1,090,000
Debit Cash 1,090,000 Credit: Bonds Payable 1,090,000
Debit: Cash 1,060,000 Credit: Premium on Bonds Payable 60,000 Credit: Bonds Payable 1,000,000
Debit: Cash 1,090,000 Credit: Premium on Bonds Payable 90,000 Credit: Bonds Payable 1,000,000
Answer: Correct option is d. Debit: Cash 1,090,000 Credit: Premium on Bonds Payable 90,000 Credit: Bonds Payable 1,000,000 |
Debit the cash account as cash inflow in business. |
Cash from bond issue = Number of shares * issue price |
= 10,000 * $ 109 |
= $ 1,090,000 |
Number of shares = $ 1,000,000 / $ 100 |
= 10,000 |
Credit the Bond payable (always recorded at face value) i.e $ 1,000,000 |
Credit the Premium on bonds payable is the difference of cash from bond issue and bonnd payable (face value). |
Premium on Bonds payable = $ 1,090,000 - $ 1,000,000 |
= $ 90,000 |
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