Question

No matter whether bonds are issued at face value, at a discount, or at a premium, the journal entry to record the issuance of bonds will always include a debit to Cash and a credit to Bonds Payable.

A. True
B. False

Answer 1

The assertion that issuances of bonds will always include a debit to Cash and a credit to Bonds Payable is false. The credits also depend on whether the bonds are issued at a discount, face value, or premium.

Step-by-step explanation:

The statement is False. When bonds are issued, the journal entry does involve a debit to Cash, but the credit entry can vary depending on whether the bonds are issued at face value, premium, or discount. If the bond is issued at face value, it would indeed involve a credit to Bonds Payable equal to the cash received.

However, if the bond is issued at a premium (more than face value), there would be an additional credit to a Premium on Bonds Payable account. Conversely, if issued at a discount (less than face value), there would be a debit to a Discount on Bonds Payable account in addition to the credit to Bonds Payable.