Question

when the market rate is 8%, a company issues $50,000 of 9%, 10-year bonds and pay interest semiannually for a selling price of $60,000. when the bonds mature, the issuer records its payment of principal with a (debit/credit) to bonds payable in the amount of $

Answer 1

When the bonds mature, the issuer records its payment of principal with a (debit) to bonds payable in the amount of $50,000.

What is the  original entry into the bonds payable account?

As at the time the bonds were issued, the bonds payable account would have been credited with bond's face value of $50,000 to indicate that the issuing company is indebted to the tune of $50,000.

When the bonds mature, there would a reversing journal entry, which reverses the original entry by debiting bonds payable account with $50,000, face value of the mature bonds.

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