Question

When the market rate is 10%, a company issues $60,000 of 12%, 10-year bonds dated January 1, 2017, that mature on December 31, 2026, and pay interest semiannually. When the bonds mature, the issuer records its payment of principal with a (debit/credit) Credit to Cash in the amount of $5000.

Answer 1

based on the sum of the principal and interest for all previous periods.  credit Cash and debit Interest Expense and Discount on Bonds Payable.

When bonds are issued at a premium, the proceeds from the issue are credited to the bonds payable account, right?

Bonds payable account is credited for the face amount when bonds are issued at a premium. A debenture bond is another name for a mortgage bond. The method of approximating interest rates is known as imputation, and the resultant interest rate is known as an imputed interest rate.

Bonds payable—is that a credit or debit account?

All premiums and discounts should have been amortized when it comes time to redeem the bonds, so the entry is just a debit to the bonds payable account and a debit is made from the cash account.

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