Question

On October 1, 2020 Macklin Corporation issued 5%, 10-year bonds with a face value of $6,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. The entry to record the issuance of the bonds would include a credit of

a. $150,000 to Interest Payable.
b. $240,000 to Discount on Bonds Payable.
c. $5,760,000 to Bonds Payable.
d. $240,000 to Premium on Bonds Payable.

Answer 1

Answer:

d. $240,000 to Premium on Bonds Payable.

Explanation:

The journal entry to record the issuance of the bond is shown below:

Cash A/c Dr $6,240,000   ($6,000,000 × 104%)

     To Bonds payable A/c $6,000,000

      To Premium on bonds payable A/c $240,000

(Being the issuance of the bond is recorded)              

Since the bond is issued at 104 that reflects the premium on bond payable for $240,000