Question

A company sells a bond with a face value of $10,000 and receives a premium of $800. Using simplified effective-interest amortization, what journal entry is used to record the issuance of the bonds?

A) Debit Cash for $10,800 and credit Bonds Payable, Net for $10,800

B) Debit Cash for $10,800, credit Bonds Payable, Net for $10,000, and credit Premium on Bond Payable for $800

C) Debit Cash for $10,000, debit Interest Expense for $800, credit Bonds Payable, Net for $10,000, and credit Premium on Bonds Payable for $800

D) Debit Cash for $10,000, debit Interest Expense for $800, credit Bonds Payable for $10,000, and credit Premium on Bonds Payable for $800

Answer

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