The entry to record the discount amortization and interest accrual on December 31, 2011, would include a
A) debit to Discount on Bonds Payable.
B) credit to Cash.
C) credit to Interest Payable.
D) debit to Bonds Ppayable.

Question

Quizplus · Accepted Answer

The discount on bonds payable account is initially recorded at the time of issuance and is gradually amortized or reduced over the life of the bond, which is the process of allocating or spreading out the discount over the bond's term. The interest accrual represents the amount of interest that has accumulated but has not yet been paid. Therefore, on December 31, 2011, a credit to interest payable is required to recognize the interest expense that has been incurred but not yet paid, and a debit to discount on bonds payable is required to record the discount amortization for the period. There is no cash transaction on this date. The Bonds Payable account is not affected by the discount amortization or interest accrual entries.

The Entry to Record the Discount Amortization and Interest Accrual