Final answer:
Bonds sold at a discount are recorded with a Debit to Cash for the actual amount received, a Credit to Bonds Payable for the face value, and a Credit to Discount on Bonds Payable for the difference between the received amount and face value.
Step-by-step explanation:
When 5,000 bonds with a face value of $1,000 each are sold at 93, the company receives 93% of the face value for each bond. This means each bond is sold for $930. To calculate the total cash received from the bond issuance, multiply the number of bonds (5,000) by the price each bond is sold for ($930).
The journal entry to record such a transaction would involve debiting Cash for the total cash received and crediting Bonds Payable for the total face value of the bonds. Additionally, since the bonds are sold at a discount (meaning they sold for less than the face value), the difference between the cash received and the total face value must be recorded in a Discount on Bonds Payable account, which is a contra-liability account.
This entry captures the fact that cash has been received for the sale of bonds, the company has a liability equal to the face value of the bonds, and there is a discount reflecting the difference between the cash received and the face value of the bonds.