Question

In: Accounting

The journal entry a company records for the payment of interest, interest expense, and amortization of...

The journal entry a company records for the payment of interest, interest expense, and amortization of bond discount is

A) debit Interest Expense, credit Cash

B) debit Interest Expense, credit Interest Payable and Discount on Bonds Payable

C) debit Interest Expense and Discount on Bonds Payable, credit Cash

D) debit Interest Expense, credit Cash and Discount on Bonds Payable

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. The journal entry to record the amortization of the premium (by the straight-line method) for the year by Lisbon Co. includes a debit to

A) Premium on Bonds Payable for $2,500

B) Interest Expense for $5,000

C) Premium on Bonds Payable for $5,000

D) Interest Expense for $2,500

The present value of $60,000 to be received in one year, at 6% compounded annually, is _____ (rounded to nearest dollar). Use the following table, if needed.

Present Value of $1 at Compound Interest

Periods	5%	6%	7%	10%	12%
1	0.95238	0.94340	0.93458	0.90909	0.89286
2	0.90703	0.89000	0.87344	0.82645	0.79719
3	0.86384	0.83962	0.81630	0.75132	0.71178
4	0.82270	0.79209	0.76290	0.68301	0.63552
5	0.78353	0.74726	0.71299	0.62092	0.56743
6	0.74622	0.70496	0.66634	0.56447	0.50663
7	0.71068	0.66506	0.62275	0.51316	0.45235
8	0.67684	0.62741	0.58201	0.46651	0.40388
9	0.64461	0.59190	0.54393	0.42410	0.36061
10	0.61391	0.55840	0.50835	0.38554	0.32197

A) $63,396

B) $56,604

C) $60,000

D) $3,396

Expert Solution

Answers :

1) D) Debit Interest Expenses, Credit Cash and Discount on Bonds Payable

2) A) Premium on Bonds Payable for $ 2,500

3) B) $56,604

1)Journal Entry for Bond Amortization with Discount include :

Debit: Interest Expenses

Credit: Cash

Credit: Discount on Bonds Payable

2) Premium on Bonds payable = 1,050,000-1,000,000 = 50,000

Bonds PRemium Amotization = 50,000/ (10*2) = 2,500

Amortization of Bonds Premium : Debit : Premium on Bonds Payable : $2,500

3) Present Value of 60,000 at 6% per year For one YEar

Present value = 60,000*0.94340 = $ 56,604

ekkarill92 answered 2 years ago

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