Samson Enterprises issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial statements? Increase assets. Increase liabilities. Increase stockholders' equity. Increase assets and liabilities.

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Business

Dakota Schmidt

12 July, 19:48

Samson Enterprises issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial statements? Increase assets. Increase liabilities. Increase stockholders' equity. Increase assets and liabilities.

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Carley Cantu · Answer 1

Assets: increase by 19,500,000

Liablities: increase by 19,500,000

Equity: no effect

Explanation:

cash proceeds: 19,500,000

face value: 20,000,000

discount 500,000

As the bonds issued were sold below par there is a discount.

the entry will be:

cash 19,500,000

discount on BP 500,000

bonds payable 20,000,000

This will generate an increase on assets for 19,500,000

and increase liablities for 19,500,000

The issuance of bonds do not generate revenues or expenses. So the equity remains unchanged-