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On January 1, a company issues bonds dated January 1 with a par value of...

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Accounting

On January 1, a company issues bonds dated January 1 with a par value of $380,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $396,210. The journal entry to record the issuance of the bond is:

Multiple Choice

  • Debit Cash $380,000; debit Premium on Bonds Payable $16,210; credit Bonds Payable $396,210.

  • Debit Cash $396,210; credit Discount on Bonds Payable $16,210; credit Bonds Payable $380,000.

  • Debit Cash $396,210; credit Bonds Payable $396,210.

  • Debit Cash $396,210; credit Premium on Bonds Payable $16,210; credit Bonds Payable $380,000.

  • Debit Bonds Payable $380,000; debit Bond Interest Expense $16,210; credit Cash $396,210.

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