Choice "C" is correct. A bond issued at 98 is issued at 98% of face value. This bond will be issued for $49,000 ($50,000 x 98%), which is equal to the bonds payable of $50,000 less a discount of $1,000. The following journal entry would be used to record the issuance of the bond:
| Debit (Dr) | Credit (Cr) |
|---|
| Cash | $ 49,000 | |
| Discount on bonds payable | 1,000 | |
| Bonds payable | | $ 50,000 |
Choice "a" is incorrect. The bonds payable account is always credited for the entire face amount of the bonds when bonds are issued. See the journal entry above.
Choice "b" is incorrect. A bond issued at 98 is issued at 98% of face value. When a bond is issued for less than face value, the bond is issued at a discount, not at a premium. A bond is issued at a premium only when the bond sells for more than face value.
Choice "d" is incorrect. Bonds payable is credited when the bond is issued and then debited when the bond is extinguished (repaid or retired).
