A Company Sells a Bond with a Face Value of $10,000

question 88

Multiple Choice

A company sells a bond with a face value of $10,000 and receives a premium of $800. Using Bonds Payable, net (shortcut method) , the company would make the following journal entry:

• A) Debit Cash for $10,800 and credit Bonds Payable, net for $10,800.
• B) Debit Cash for $10,800, credit Bonds Payable, net for $10,000, and credit Premium on Bond Payable for $800.
• C) Debit Cash for $10,000, debit Interest Expense for $800, credit Bonds Payable, net for $10,000, and credit Premium on Bonds Payable for $800.
• D) Debit Cash for $10,000, debit Interest Expense for $800, credit Bonds Payable for $10,000 and credit

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Definitions:

Expected Price Level

The price level consumers, producers, and investors anticipate in the future, influencing their economic decisions in the present.

Wage Bargaining

The negotiation process between employees (or their representatives) and employers regarding the terms of employment, focusing primarily on salary or wage levels.

Long Run

A period in which all factors of production and costs are variable, and firms can adjust all inputs.

Short-Run Aggregate Supply Curve

A graphical representation that shows the relationship between the total production of goods and services in an economy at different price levels in the short run, indicating how much output is supplied by firms at various prices.