Four thousand bonds with a face value of $1,000 each, are sold at 105. The entry to record the issuance is
A) Cash 4,200,000 Bonds Payable 4,200,000
B) Cash 4,000,000 Premium on Bonds Payable 200,000
Bonds Payable 4,200,000
C) Cash 4,200,000 Premium on Bonds Payable 200,000
Bonds Payable 4,000,000
D) Cash 4,200,000 Discount on Bonds Payable 200,000
Bonds Payable 4,000,000

Question

Quizplus · Accepted Answer

The bonds are sold at 105% of their face value, so the cash received is $4,200,000. The bonds payable is recorded at face value ($4,000,000), and the premium on bonds payable is the difference ($200,000).

Four Thousand Bonds with a Face Value of $1,000 Each