Asked by
Cortez Wamble
on Nov 18, 2024
Verified
The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be
A) debit Bonds Payable, credit Cash
B) debit Cash and Discount on Bonds Payable, credit Bonds Payable
C) debit Cash, credit Premium on Bonds Payable and Bonds Payable
D) debit Cash, credit Bonds Payable
Premium on Bonds Payable
The amount by which a bond's selling price exceeds its face value or par value.
Contract Rate
This term typically refers to the interest rate agreed upon in a financial or loan agreement.
Market Rate
The prevailing interest rate available in the marketplace on investments, loans, or savings.
- Gain an understanding of how market and contract rates influence the issuance of bonds and the computation of the issue price.
- Discuss the entries in accounting for bond issuance, interest payouts, the method of amortizing bond discount/premium, and procedures for bond redemption.
Verified Answer
HA
Learning Objectives
- Gain an understanding of how market and contract rates influence the issuance of bonds and the computation of the issue price.
- Discuss the entries in accounting for bond issuance, interest payouts, the method of amortizing bond discount/premium, and procedures for bond redemption.
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