Question

Multiple Choice Question 68 On January 1, 2020, Bonita Industries issued $5400000, 10-year, 4% bonds at 102. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2020 is

Answer 1

Answer and Explanation:

The journal entry is shown below:

Cash ($5,400,000 × 102%) $5,508,000

To Bonds Payable $5,400,000

To Premium on Bonds Payable $108,000

(To record the issuance of the bond payable)

In the above journal entry, the cash is debited as it increased the assets and credited the bond payable and premium on bond payable as it increased the liabilities