Question

In: Accounting

On January 1, a company issues bonds dated January 1, 2018 with a par value of...

On January 1, a company issues bonds dated January 1, 2018 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid annually on December 31. The bonds are sold for $312,200. The journal entry to record the first interest payment using straight-line amortization is:

Muheet Corporation issues $550,000, 10%, 5-year bonds on January 1, 2019 for $489,000. Interest is paid annually on January 1. If Muheet Corporation uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at December 31, 2019 would be:
Select one:
a. $55,000.
b. $42,800.
c. $61,000.
d. $67,200.

Please Solve As soon as
Solve quickly I get you two UPVOTE directly
Thank's
Abdul-Rahim Taysir

Solutions

Expert Solution

QUESTION 1

On January 1, a company issues bonds dated January 1, 2018 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid annually on December 31. The bonds are sold for $312,200. The journal entry to record the first interest payment using straight-line amortization is:

ANSWER

Par value - $300,000

Years to maturity – 5 Years

Contract Rate – 9%

Current Price - $312,200

Method – Straight line method

Premium = current price – par value

                  $312200-$300000=12200

Each year amortized cost= 12200/5=2440

DATE

ACCOUNT

DEBIT

CREDIT

Dec 31

Interest expense(27000-2440)

$24560

Amortization of bond premium

$2440

Cash(300000*0.09)

$27000

QUESTION 2

Muheet Corporation issues $550,000, 10%, 5-year bonds on January 1, 2019 for $489,000. Interest is paid annually on January 1. If Muheet Corporation uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at December 31, 2019 would be:
Select one:
a. $55,000.
b. $42,800.
c. $61,000.
d. $67,200.

ANSWER 2 will be option (D). $67200

Par value - $550,000

Years to maturity – 5 Years

Contract Rate – 10%

Current Price - $489,000

Method – Straight line method

Discount = par value- current price

                  $550,000-$489,000 = $61000

Each year amortized cost= 61000/5 = 12200

Journal entry would be

Dr. Interest expense      67200

Cr. Amortization of bond discount           12200

Cr.   Cash (550000*0.1)                            55000

ANSWER

Interest expense $ 67200

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

1. On January 1, a company issues bonds dated January 1 with a par value of...
1. On January 1, a company issues bonds dated January 1 with a par value of $260,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $271,091. The journal entry to record the first interest payment using straight-line amortization is: (Rounded to the nearest dollar.) Multiple Choice Debit Bond Interest Expense $10,209; credit Discount on Bonds...
On January 1, a company issues bonds dated January 1 with a par value of $330,000....
On January 1, a company issues bonds dated January 1 with a par value of $330,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $317,254. The journal entry to record the issuance of the bond is: Multiple Choice Debit Cash $317,254; debit Discount on Bonds Payable $12,746; credit Bonds Payable $330,000. Debit Cash $330,000; credit...
On January 1, a company issues bonds dated January 1 with a par value of $380,000....
On January 1, a company issues bonds dated January 1 with a par value of $380,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $396,210. The journal entry to record the issuance of the bond is: Multiple Choice Debit Cash $380,000; debit Premium on Bonds Payable $16,210; credit Bonds Payable $396,210. Debit Cash $396,210; credit...
On January 1, a company issues bonds dated January 1 with a par value of $400,000....
On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the issuance of the bond is: a. Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000. b. Debit Bonds Payable $400,000;...
On January 1, a company issues bonds dated January 1 with a par value of $390,000....
On January 1, a company issues bonds dated January 1 with a par value of $390,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $405,830. The journal entry to record the first interest payment using the effective interest method of amortization is: (Rounded to the nearest dollar.) a. Debit Bond Interest Expense 19,133.00; credit Premium...
On January 1, a company issues bonds dated January 1 with a par value of $770,000....
On January 1, a company issues bonds dated January 1 with a par value of $770,000. The bonds mature in 3 years. The contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds are sold for $761,000. The journal entry to record the first interest payment using straight-line amortization is: Multiple Choice Debit Interest Payable $30,800; credit Cash $30,800. Debit Interest Expense $30,800; credit Cash $30,800. Debit Interest Expense $32,300; credit Discount on...
On January 1, a company issues bonds dated January 1 with a par value of $300,000....
On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $288,413. The journal entry to record the first interest payment using the effective interest method of amortization is: A) Debit Interest Expense $12,579; debit Discount on Bonds Payable $921; credit Cash...
12. On January 1, a company issues bonds dated January 1 with a par value of...
12. On January 1, a company issues bonds dated January 1 with a par value of $740,000. The bonds mature in 3 years. The contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds are sold for $719,000. The journal entry to record the first interest payment using straight-line amortization is: 16. On January 1, a company issues bonds dated January 1 with a par value of $330,000. The bonds mature in 5...
On January 1, a company issues bonds dated January 1 with a par value of $390,000....
On January 1, a company issues bonds dated January 1 with a par value of $390,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $405,830. The journal entry to record the first interest payment using straight-line amortization is: (Rounded to the nearest dollar.)
On January 1, a company issues bonds dated January 1 with a par value of $390,000....
On January 1, a company issues bonds dated January 1 with a par value of $390,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $405,830. The journal entry to record the first interest payment using straight-line amortization is: (Rounded to the nearest dollar.)
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT