Use the following to answer questions
On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization.
-Which of the following answers shows the effect of the bond issuance on 1/1/16?

Question

Use the following to answer questions 
On January 1,2016,Pierce Corporation issued $25,000 in 8%,5-year bonds payable at 102.Interest payments are due each December 31.Potter uses the straight-line method of amortization.
-Which of the following answers shows the effect of the bond issuance on 1/1/16?

Quizplus · Accepted Answer

On 1/1/16, Pierce Corporation issued $25,000 in bonds payable at 102, meaning the bonds were sold for $25,000 x 102% = $25,500. This transaction results in an increase in cash (asset) of $25,500 and an increase in bonds payable (liability) of $25,000. Therefore, the correct answer is A.

Use the Following to Answer Questions