New England Company sells $100,000 of 5%, 15-year bonds for 59334 on April 1, 20

ID: 2390484 • Letter: N

Question

New England Company sells $100,000 of 5%, 15-year bonds for 59334 on April 1, 2016. The market rate of interest on that day is 10.5%. Interest is paid each year on April 1. The entry to record the sale of the bonds on April 1 would be as follows: (Intermediary and final answer calculations are rounded to the nearest whole number.) O A. Cash 59,334 Discount on Bonds Payable Bonds Payable 40,666 100,000 OB. Cash 59,334 Bonds Payable 59,334 O C. Cash 100,000 Discount on Bonds Payable Bonds Payable 40,666 59,334 OD. Cash 100,000 Bonds Payable 100,000

Explanation / Answer

The Answer is” Option A ”

Date

Accounts Tittles and Explanations

Debit ($)

Credit ($)

April 1, 2016

Cash A/c

59,334

Discount on Issue of Bond A/c

40,666

To Bond Payable A/c

100,000

[ Entry to record the Sale of Bonds on April 1, 2016]

Cash Proceeds from the sale of Bond = $100,000 x 0.59334 = $59,334

Discount on Issue of Bond = $100,000 – 59,334 = 40,666