The Amazing Widget Company Issues $500,000 of 6%,10-Year Bonds at 103

question 27

Multiple Choice

The Amazing Widget Company issues $500,000 of 6%,10-year bonds at 103 on March 31,2014.The bond pays interest on March 31 and September 30.The market rate of interest on the issuance date was 4%.Assume the company uses the straight-line method for amortization.The journal entry to record the issuance would include a:

• A) debit to Cash for $500,000.
• B) credit to Bonds payable for $515,000.
• C) credit to Discount on bonds payable for $15,000.
• D) debit to Cash for $515,000.

---

Definitions:

Paid-In Capital

Paid-in capital is the amount of money that a company has received from shareholders in exchange for stock, reflecting the funding provided to the company over and above the par value of the shares.

Retained Earnings

The portion of net income that is kept by a company rather than distributed to its shareholders as dividends, to be reinvested in the business or pay off debt.

Treasury Stock

Shares that were once in circulation but were bought back by the issuing company, decreasing the amount of stock outstanding.

Par Common Stock

The nominal or face value assigned to a share of common stock by the company's corporate charter.