A company issues bonds with a $100,000 par value, an 8% annual contract rate, semiannual interest payments, and a five year life. The bonds sold for $107,850. The entry to record the issuance of the bonds will include. a. A credit to Premium on Bonds Payable of $7,850. b. A debit to Discount on Bonds Payable of $7,850 c. A credit to Cash of $100.000.d. A credit to Bonds Payable of $107850

The entry to record the bonds issuance will include a. A credit to Premium on Bonds Payable of $7,850.

Data Analysis:

Debit Cash $107,850

Credit Bonds Payable $100,000

Credit Bonds Premium $7,850

The debit entry is made in the Cash Account in the amount of $107,850.  The Bonds Payable account is credited with $100,000, being the face or par value of the bonds.  Finally, the Bonds Premium is credited with the sum of $7,850, being the difference between the cash proceeds and the face value of the bonds.

Thus, the entry to record the issuance of the bonds will include a. A credit to Premium on Bonds Payable of $7,850.

Learn more about recording bonds issuance at a premium link

d. A credit to Premium on Bond Payable $7,850

Explanation:

When bonds are issued at a premium it is recorded as cash is debited with the amount received by issuing bonds with $100,000 of Bonds payable to be credited and the remaining $7850 also to be credited as a Bonds premium. When a discount is provided on bonds the amount received is less than the par value of the bonds.

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