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Question
On January 1 of 2015, Parson Freight Company issues 7%, 10-year bonds with a par value of $2,000,000. The bonds pay interest semi-annually. The market rate of interest is 8% and the bond selling price was $1,864,097. The bond issuance should be recorded as:
A. Debit Cash $2,000,000; credit Bonds Payable $2,000,000.
B. Debit Cash $1,864,097; credit Bonds Payable $1,864,097.
C. Debit Cash $2,000,000; credit Bonds Payable $1,864,097; credit Discount on Bonds Payable $135,903.
D. Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000.
E. Debit Cash $1,864,097; debit Interest Expense $135,903; credit Bonds Payable $2,000,000.
Answer
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