A company issues $60 million of bonds at par on January 1, 2007. The bonds pay 1

Question

A company issues $60 million of bonds at par on January 1, 2007. The bonds pay 10% interest semi-annually on 12/31 and 6/30 and mature in 20 years. The journal entry when the bonds are sold is:

a. Debit accounts recievable for $60 million, credit bond payable for $60 million

b. Debit cash for $54 million, Debit bond discount for $6 million, Credit bond payable for $60 million

c. Debit cash for $60 million, Credit bond payable for $60 million

d. Debit cash for $60 million, Credit bond prieuim for $6 million, Credit bond payable for $54 million

Explanation / Answer

Since the bonds are issued at par therefore

c. Debit cash for $60 million, Credit bond payable for $60 million

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