Burton Corporation recorded the following in its general jou

Burton Corporation recorded the following in its general journal on 1/1/16: 196,000 4,000 Discount on Bonds Payable Bonds Payable 200,000 Which of the following answers correctly describes the transaction on 1/1/16? Burton issued bonds at 102 O Burton issued bonds at 98. Burton issued bonds at a $4,000 premium. Burton signed a note payable for $196,000.

Solution

The correct option is B.

The bonds having value of $200,000 are issued at 98 ie cash received would be =$200,000*0.98=$196000 while the remaining $4000 is the discount on bonds that is recorded as :Discount on bonds payable.