Four thousand bonds with a face value of $1,000 each, are sold at 102. The entry to record the issuance is
A) Cash 4,080,000 Bonds Payable 4,080,000
B) Cash 4,000,000 Premium on Bonds Payable 80,000
Bonds Payable 4,080,000
C) Cash 4,080,000 Premium on Bonds Payable 80,000
Bonds Payable 4,000,000
D) Cash 4,080,000 Discount on Bonds Payable 80,000
Bonds Payable 4,000,000

Question

Quizplus · Accepted Answer

The bonds are sold at 102, meaning they are sold at 102% of their face value. The total cash received is 4,000 bonds x $1,000 x 1.02 = $4,080,000. The bonds payable is recorded at face value, $4,000,000, and the excess amount is recorded as a premium on bonds payable, $80,000.

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