Right Track Company sells $250,000 of 12%, 5-year bonds for 884052 on April 1, 2

Question

Right Track Company sells $250,000 of 12%, 5-year bonds for 884052 on April 1, 2016. The market rate of interest on that day is 15.5%. Interest is paid each year on April 1. The entry to record the sale of the bonds on April 1 would be as follows: (Intermediary and final answer calculations are rounded to the nearest whole number.) OA Cash 250,000 Discount on Bonds Payable Bonds Payable 28,987 221,013 O B. Cash OC. Cash O D. Cash 221,013 Bonds Payable 221,013 250,000 Bonds Payable 250,000 221,013 Discount on Bonds Payable Bonds Payable 28,987 250,000 Click to select your answer

Explanation / Answer

Par value of Bond = 250000

Issue price of bond = 250000*88.4052% = 221013

Discount on issue of bond = Par value - Issue price = 250000 - 221013 = 28987

Journal entry:

Cash 221013

Discount on Bonds Payable 28987

Bonds Payable 250000

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