Blanding Company Issues $1,000,000 of 8%, 10-Year Bonds at 98

question 32

Multiple Choice

Blanding Company issues $1,000,000 of 8%, 10-year bonds at 98 on February 28, 2014. The bonds pay interest on February 28 and August 31. The journal entry to record the issuance would include a:

• A)debit to Cash for $1,000,000.
• B)credit to Bonds Payable for $980,000.
• C)credit to Discount on Bonds Payable for $20,000.
• D)debit to Cash for $980,000.

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Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business.

Debt-to-Equity Ratio

A financial metric that shows the comparative ratio of equity to debt employed to fund a company's assets.

Return on Equity

A measure of a corporation's profitability, calculated as net income divided by shareholders' equity, indicating how effectively equity is being used.

Return on Assets

A measurement of profitability indicating how efficiently a company uses its assets to generate earnings.