Question

Candy Corporation has $100,000 of 8% bonds that were issued in Year 1 at face amount. When the bonds are repaid at the maturity date, the journal entry will require which of the following entries?

a) Credit bonds payable $100,000
b) Credit cash $100,000
c) Debit cash $100,000
d) Debit bonds payable $100,000

Answer 1

The journal entry to repay bonds at maturity includes a debit to bonds payable for $100,000 and a credit to cash for $100,000. Therefore, the correct answers are a) Credit bonds payable $100,000 and c) Debit cash $100,000.

Step-by-step explanation:

When the Candy Corporation repays its $100,000 of 8% bonds at maturity, the correct journal entry will include both a debit and a credit.

The bonds were issued at face value, so at maturity, the company needs to record the repayment of the bond principal.

The journal entry to record the repayment would be a debit to bonds payable for $100,000, which removes the liability from the company's balance sheet.

Simultaneously, a credit to cash for $100,000 is made, indicating that cash has been paid out to bondholders. Therefore, the correct answers are a) Credit bonds payable $100,000 and c) Debit cash $100,000.