Question

In: Accounting

On January 1, a company issued and sold a $391,000, 7%, 10-year bond payable, and received...

On January 1, a company issued and sold a $391,000, 7%, 10-year bond payable, and received proceeds of $386,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:

Multiple Choice

  • Debit Bond Interest Expense $13,435; debit Discount on Bonds Payable $250; credit Cash $13,685.

  • Debit Bond Interest Expense $27,370; credit Cash $27,370.

  • Debit Bond Interest Expense $13,935; credit Cash $13,685; credit Discount on Bonds Payable $250.

  • Debit Bond Interest Expense $13,685; debit Discount on Bonds Payable $250; credit Cash $13,935.

  • Debit Bond Interest Expense $13,685; credit Cash $13,685.

Solutions

Expert Solution

C. Debit Bond Interest Expense $13,935; credit Cash $13,685, credit Discount on Bonds Payable $250

Cash = $391,000 x .07 x 1/2 = $13,685

Discount Amortized = ($391,000 - $386,000) / 20 = $250

Interest expense = $13,685 + $250 = $13,935


Related Solutions

On January 1, a company issued and sold a $409,000, 6%, 10-year bond payable, and received...
On January 1, a company issued and sold a $409,000, 6%, 10-year bond payable, and received proceeds of $404,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: Multiple Choice Debit Bond Interest Expense $12,020; debit Discount on Bonds Payable $250; credit Cash $12,270. Debit Bond Interest Expense $12,520; credit Cash $12,270; credit Discount on Bonds Payable $250. Debit Bond...
On January 1, a company issued and sold a $407,000, 8%, 10-year bond payable, and received...
On January 1, a company issued and sold a $407,000, 8%, 10-year bond payable, and received proceeds of $402,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: Multiple Choice Debit Bond Interest Expense $16,530; credit Cash $16,280; credit Discount on Bonds Payable $250. Debit Bond Interest Expense $32,560; credit Cash $32,560. Debit Bond Interest Expense $16,030; debit Discount on...
On January 1, a company issued and sold a $330,000, 4%, 10-year bond payable, and received...
On January 1, a company issued and sold a $330,000, 4%, 10-year bond payable, and received proceeds of $323,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the second interest payment is:
On January 1, a company issued and sold a $430,000, 5%, 10-year bond payable, and received...
On January 1, a company issued and sold a $430,000, 5%, 10-year bond payable, and received proceeds of $420,000. Interest is payable each June 30 and December 31. The company uses the straight line method to amortize the discount. The carrying value of the bonds immediately after the second interest payment is
1.On January 1, a company issued and sold a $408,000, 9%, 10-year bond payable, and received...
1.On January 1, a company issued and sold a $408,000, 9%, 10-year bond payable, and received proceeds of $403,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: a. Debit Bond Interest Expense $36,720; Credit cash $36,720 b. Debit Bond Interest Expense $18,360; Credit Cash $18,360 c. Debit Bond INterest Expense $18,360; debit dicsount on bonds payable $250; credit cash...
On January 1, 2013, a company issued and sold a $450,000, 7%, 10-year bond payable and...
On January 1, 2013, a company issued and sold a $450,000, 7%, 10-year bond payable and received proceeds of $445,500. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
On January 1, MOA, Inc. issued and sold a $200,000, 5.5%, 20-year bond payable, and received...
On January 1, MOA, Inc. issued and sold a $200,000, 5.5%, 20-year bond payable, and received proceeds of $250,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the premium. The journal entry to record the first interest payment is: Debit Bond Interest Expense $14,210; credit Cash $14,210. Debit Bond Interest Expense $11,000; credit Cash $11,000. Debit Bond Interest Expense $6,750; credit to Premium on Bonds Payable $1,250; credit Cash $5,500. Debit...
On January 1, 2016, BSC Corp issued a 10-year, $10,000,000, 7% bond. The interest is payable...
On January 1, 2016, BSC Corp issued a 10-year, $10,000,000, 7% bond. The interest is payable semi-annually. The market rate of interest for companies similar to BSC is 5%. BSC uses the effective-interest amortization method. The bond liability on BSC’s balance as of December 31, 2016 (the first year of the bond) is closest to: A. $11,435,336 B. $11,305,500 C. $11,497,889 D. $11,558,916 Based on the same information provided above, BSC’s interest expense for December 31, 2017 (the second year...
An insurance company issued a $45,000, 6% 10 year bond payable at 112 on January 1,...
An insurance company issued a $45,000, 6% 10 year bond payable at 112 on January 1, 2018. Interest is paid semiannually on Jan 1 and July 1. 1. Journalize the issuance of bond payable on January 1 2. Journalize the payment of semi-annual interest and amortization of the bond discount or premium on July 1, 2018
Owen Company issued a $110,000, 11%, the 10-year bond payable at 94 on January 1, 2018.
  S12-7 Journalizing bond transactions Owen Company issued a $110,000, 11%, the 10-year bond payable at 94 on January 1, 2018. Interest is paid semiannually on January 1 and July 1. Requirements 1. Journalize the issuance of the bond payable on January 1, 2018. 2. Journalize the payment of semiannual interest and amortization of the bond discount or premium on July 1, 2018.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT