The journal entry a company records for the issuance of bonds when the contract rate is less 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

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Jessica Zamarro · Accepted Answer

Final Answer : B, Explanation :  When a company issues bonds with a contract rate that is less than the market rate, the bonds will be sold at a discount. This means that the amount received by the company for the bonds will be less than their face value. Therefore, the journal entry to record the issuance of bonds would be to debit Cash (for the amount received), and Discount on Bonds Payable (for the amount of the discount), and credit Bonds Payable (for the face value of the bonds).

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