Question

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a
Select one:
a. credit to Cash for $1,920,00
b. debit to Cash of $2,000,000
c. debit to Discount on Bonds Payable for $80,000
d. credit to Bonds Payable for $1,920,000

Answer 1

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a debit to Discount on Bonds Payable for $80,000. Hence, the correct option is C.

What is Discount on Bonds Payable?

• Bonds Payable and Discount on Bonds Payable must always be recorded on the balance sheet simultaneously.

• When a company issues bonds, it enters into a long-term obligation to make regular interest payments, often twice a year. If the interest dates fall outside the range of the balance sheet dates, the corporation must accumulate interest in the appropriate periods.
• If a discount was applied to bonds receivable, the periodic entry would be a debit to interest expenditure and a credit to the discount, increasing the issuer's total interest expense.

• To put it another way, if the bond represents a long-term debt, the balance sheet will display Bonds Payable and Discount on Bonds Payable as such.

• The account Discount on Bonds Payable (also known as Bond Discount or Unamortised Bond Discount) is a contra liability account because it will have a debit balance.

Learn more about Discount on Bonds Payable here: https://brainly.com/question/14013974

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