Choice "A" is correct. Under IFRS, bond issue costs are deducted from the carrying value of the liability and included in the debit entry to bond discount upon issuance. As part of the discount from par, bond issue costs are amortized over the life of the bond using the effective interest method. The initial accounting entry upon issuance is:
| Debit (Dr) | Credit (Cr) |
|---|
| Cash | $ 92,000 | |
| Discount | 8,000 | |
| Bonds payable | | $ 100,000 |
Choice "b" is incorrect. Bond issue costs are booked as an asset under U.S. GAAP, not under IFRS.Choice "c" is incorrect. Under both IFRS and U.S. GAAP, the debit to cash is for the sale price less the bond issue costs ($92,000).
Choice "d" is incorrect. Under IFRS, the discount includes the bond issue costs and will be amortized using the effective interest method. The straight-line method is not permitted when accounting for bonds under IFRS.
