Question

Forever 21 receives $100,000 cash in exchange for issuing 100 bonds at their $1,000 face value. What is the journal entry for this transaction?

A) Debit Cash $100,000; Credit Bonds Payable $100,000
B) Debit Cash $100,000; Credit Premium on Bonds Payable $5,000; Credit Bonds Payable $95,000
C) Debit Cash $100,000; Credit Discount on Bonds Payable $5,000; Credit Bonds Payable $95,000
D) Debit Cash $100,000; Credit Interest Expense $5,000; Credit Bonds Payable $95,000

Answer 1

The journal entry for this transaction is Debit Cash $100,000; Credit Bonds Payable $100,000.

Step-by-step explanation:

The correct journal entry for this transaction is:

Debit Cash $100,000; Credit Bonds Payable $100,000

This entry reflects the receipt of $100,000 in cash and the issuance of 100 bonds with a face value of $1,000 each.

No additional accounts such as Premium on Bonds Payable, Discount on Bonds Payable, or Interest Expense are involved in this transaction.