The choices are:
a. Cash; face value
b. Bonds Payable; face value
c. Bonds Payable; market value
d. Discount on Bonds Payable; face value
The answer is b.
The bond is issued on its faces amount. The amortization would be based on the face value. The issuer would receive a certain amount from the buyer and would be liable for the issued bond.
The bonds transaction are done in different ways, there are discounted and premium offered. It could give different outputs that depend upon the agreement between the issuer and the buyer/investor. Sometimes the investor can already benefit from discounts which can give bigger investment opportunity. Or the investor could agree with premium bonds which provide lesser investment for investors.
