BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Credits
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Debits
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Aging report
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Current liability
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Detailed explanation-1: -Bonds payable are recorded when a company issues bonds to generate cash. As a bond issuer, the company is a borrower. As such, the act of issuing the bond creates a liability. Thus, bonds payable appear on the liability side of the company’s balance sheet.
Detailed explanation-2: -Record the appropriate book entries upon issuing the bond. Record a debit to the Cash account and a credit to Bonds Payable, both for the total face value of the bonds issued. To record the sale of a $1000 bond, for example, debit Cash for $1000 and credit Bonds Payable (a long-term liability account) for $1000.
Detailed explanation-3: -Bond payable is debited and cash credited to record the retirement of bond.
Detailed explanation-4: -If there was a premium on bonds payable, then the entry is a debit to premium on bonds payable and a credit to interest expense; this has the effect of reducing the overall interest expense recorded by the issuer.