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Huang Inc. issued 100 bonds with a face value of $1,000 and a 5-year term at $960 each. The journal entry to record this transaction includes ________. A. a debit to Bonds Payable for $100,000 B. a debit to Discount on Bonds Payable for $4,000 C. a credit to cash for $96,000 D. a credit to Discount on Bonds Payable for $4,000

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 13, Problem 17MC
Textbook Problem
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Huang Inc. issued 100 bonds with a face value of $1,000 and a 5-year term at $960 each. The journal entry to record this transaction includes ________.

A. a debit to Bonds Payable for $100,000

B. a debit to Discount on Bonds Payable for $4,000

C. a credit to cash for $96,000

D. a credit to Discount on Bonds Payable for $4,000

To determine

Concept introduction:

Bonds:

are defined as debt instruments which are usually issued by the company that borrows to its lenders. They are issued at a rate of interest that is specified and for a specified period of time. The bondholders receive a fixed rate of interest on the bonds and the repayment of the bonds is made at the maturity date.

Amortization of Bonds discount or premium:

The Bonds can be issued at a discount or premium. The discount or premium on issue of bonds or the life of bonds is amortized using the effective rate methods or the straight line method.

Journal Entry:

In journal entry company records all the business transactions which are in monetary form. Company records the transaction on debit and credit in journal entry which are always equal.

To choose:

The part of the journal entry for the issue of bonds.

Explanation of Solution

The journal entry for the issue of bonds is explained is as follows:

Journal entries
Account Title Debit Credit
     
Cash (100 bonds @ $960)

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Chapter 13 Solutions

Principles of Accounting Volume 1
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