On January 1, a Company Issues Bonds Dated January 1

question 64

Multiple Choice

On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the issuance of the bond is:

• A) Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds Payable $300,000.
• B) Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds Payable $312,177.
• C) Debit Bonds Payable $300,000; debit Interest Expense $12,177; credit Cash $312,177.
• D) Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000.
• E) Debit Cash $312,177; credit Bonds Payable $312,177.

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Definitions:

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.

Organizational Entity

Refers to any organizationally defined unit within a business, such as departments, divisions, teams, or any designated group of employees.

Alliance

A formal agreement or union between parties, often organizations or nations, to work together towards common goals.

Achieving Legitimacy

The process through which an organization seeks to be accepted or regarded as proper or valid within a certain context or by a specific audience.