well for MCQs most of them are gunna be on the issuers side so the easiest way is to record it like this:
DR Cash (for amount received or if it says at 102 or 98 you mulitiple the face value by this percentage 1.02 or .98)
DR Discount (Plug)
CR B/P face amount
CR Premium (Plug)<===or instead of a discount
the premium or discount is basically the difference between the cash you received and the face value of the bond (B/P) if the effective interest rate is higher than the stated rate you have a discount because you want to earn more than what they are offering so they better give it to you cheaper,,,if the effective rate is lower than the stated rate you have a premium because you are getting a higher interest than what the company actually wants you to make on it so they sell it to you for more.
BIC is always a debit to reduce the carrying amount of the bonds and then it gets amortized out on a SL basis over the term of the bond which will actually increase interest expense but reduce the cash you have to pay out at the time…almost like a prepaid interest expense.
When you pay interest you are crediting cash for the amount you have to give them (face value x stated rate) but your interest expense is the carrying value x the effective rate…the difference is your amortization
it's always easy to start w BP which is always give,,its the face value,,,then debit the cash for what they get,,,and use the diff as your plug for disc/premium.
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