Question

Gross Company sold $100,000 of long-term bonds in the open market for $108,000. The entry to record the transaction would be:DR Cash 100,000 DR Premium on Bonds Payable 8,000 CR Bonds payable 108,000DR Bonds payable 108,000 CR Cash 108,000DR Accounts payable 108,000 CR Bonds payable 108,000DR Cash 108,000 CR Premium on Bonds Payable 8,000CR Bonds payable 100,000

Answer 1

The answer is D

Step-by-step explanation:

Any transaction that increases asset and expenses go into debit side while any transaction that decreases asset and expenses go into credit side.

Also, any transaction that increases income, liability equity into credit side and vice-versa.

The long-term bond was sold for $108,000. Cash(an asset) was received. Hence, we debit cash account (DR Cash $108,000).

Bonds payable is a liability. The liability will be increased by $100,000, meaning, we credit the account with this amount. Same goes for Premium on Bonds Payable.

Dr Cash $108,000

Cr Premium on Bonds Payable $8,000

Cr Bonds payable $100,000