Question

Urban Outfitters receives $93,376 for bonds with a face value of $100,000. What would the discount journal entry look like?

A) Debit Cash $93,376; Credit Bonds Payable $100,000; Credit Discount on Bonds Payable $6,624
B) Debit Cash $93,376; Credit Bonds Payable $100,000; Credit Premium on Bonds Payable $6,624
C) Debit Cash $93,376; Credit Bonds Payable $93,376
D) Debit Cash $93,376; Credit Discount on Bonds Payable $6,624; Credit Bonds Payable $100,000

Answer 1

The correct journal entry for Urban Outfitters when receiving discounted bonds is to debit Cash, credit Bonds Payable, and credit Discount on Bonds Payable.

Step-by-step explanation:

The correct answer is A) Debit Cash $93,376; Credit Bonds Payable $100,000; Credit Discount on Bonds Payable $6,624.

When Urban Outfitters receives $93,376 for bonds with a face value of $100,000, it means that there is a discount on the bonds.

The journal entry should debit Cash for the amount received ($93,376), credit Bonds Payable for the face value of the bonds ($100,000), and credit Discount on Bonds Payable for the difference between the amount received and the face value ($6,624).