On January 1, 2015, a company issues 5-year bonds with a stated interest rate of 6% and records the following journal entry:
Dr. Cash $520,000
Cr. Premium on bonds payable $20,000
Cr. Bonds payable $500,000
The bonds pay interest annually on December 31, which is when the company's fiscal year ends.
The journal entry made on January 1, 2020, when the bonds mature will include:
a.
A credit to cash for $520,000 and a debit to bonds payable for $500,000.
b.
A debit to cash for $520,000 and a credit to bonds payable for $500,000.
c.
A debit to cash for $500,000 and a credit to bonds payable for $500,000.
d.
A credit to cash for $500,000 and a debit to bonds payable for $500,000.
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