Multiple Choice Question 147 Swifty Corporation issues 2600

Multiple Choice Question 147

Swifty Corporation issues 2600, 10-year, 6%, $1000 bonds dated January 1, 2018, at 99. The journal entry to record the issuance will show a:

A. debit to Cash of $2600000.

B. debit to Cash for $2574000.

C. credit to Discount on Bonds Payable for $26000

D. credit to Bonds Payable for $2626000

Solution

Answer

A

No. of bonds

2600

B

Amount per bond

$                               1,000.00

C=A x B

Face Value of Bonds Payable

$                       2,600,000.00

D

Issue Value of Bonds Payable [$2,600,000 x 99% = Cash received ]

$                       2,574,000.00

E= C - D

Discount on Bonds Payable

$                             26,000.00

Date

Accounts title

Debit

Credit

01-Jan-18

Cash

$                       2,574,000.00

Discount on Bonds Payable

$                             26,000.00

Bonds Payable

$         2,600,000.00

(Bonds payable issued at discount)