A Firm Issues Convertible Bonds That Pay 8% Interest and Receives

A firm issues convertible bonds that pay 8% interest and receives $100,000.The firm could have issued nonconvertible bonds that pay 8% interest but would have received only $80,000 in bond proceeds.What journal entry is necessary under GAAP to record the issuance of the convertible bonds?

A) Cash 100,000 Convertible Bonds Payable 80,000
Additional Paid-in Capital 20,000
B) Cash 100,000 Convertible Bonds Payable 80,000
Convertible Bond income 20,000
C) Cash 100,000 Convertible Bonds Payable 100,000
D) Convertible Bonds Payable 100,000 Cash 100,000
E) No entry is required

Correct Answer:

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