On 1/1/20X1, PDQ Corp issues $2.5 million of 15-year bonds at par value. The jou

Question

On 1/1/20X1, PDQ Corp issues $2.5 million of 15-year bonds at par value. The journal entry to record the issuance of bonds on 1/1/20X1 would include which of the following:

Debit Interest Expense $2.5 million

Credit Cash $2.5 million

Credit Bonds Payable $2.5 million

Debit Bonds Payable $2.5 million

Credit Interest Expense $2.5 million

Debit Interest Expense $2.5 million

Credit Cash $2.5 million

Credit Bonds Payable $2.5 million

Debit Bonds Payable $2.5 million

Credit Interest Expense $2.5 million

Explanation / Answer

Journal entry to record issue of bond at par will be

Cash 2.5 Million

Bonds Payable    2.5 Million

So answer is option c Credit bonds payable by 2.5 Million

where we have created a liability to pay back these amount received on bonds

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