Question

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 $18,610

d. debit bond interest expense $18,110; debit discount on bonds payable $250; credit cash $18,360

e. Debit bond interest expense $18,610; credit cash $18,360; credit discount on bonds payable $250

2.On January 1, a company issues bonds dated January 1 with a par value of $730,000. 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 $718,000. The journal entry to record the first interest payment using straight-line amortization is:

a. Debit interest expense $38,500; credit discount on bonds payable $2,000; credit cash $36,500

b. debit interest payable $36,500; credit cash $36,500

c. debit interest expense $36,500; credit premium on bonds payable $2,000; credit cash $34,500

d. debit interest expense $36,500; credit cash $36,500

e. debit interest expense $34,500; debit discount on bonds payable $2,000; credit cash $36,500

3.Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $133,000; Chris, $93,000; and Molly, $113,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $73,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:

a. $73,000

b. $130,180

c. $135,820

d. $82,400

e. $133,000

Answer 1

Q1.
Answer is e. Debit Bond interest expense $18610; credit cash $18360 and credit discount on bonds $ 250
Explanation:
Total discount on bonds issued: 408000-403000= 5000
Periods: 20 periods
Amortization of Semi Annual Discount (5000/20): 250
Cash interest paid: 408000*9%*6/12 = 18360
Total Interest expense: 18360+250 = 18610
Q2.
Answer is a. Debit Bond interest expense $38500; credit cash $36500 and credit discount on bonds $ 2000
Explanation:
Total discount on bonds issued: 730000-718000= 12000
Periods: 6 periods
Amortization of Semi Annual Discount (12000/6): 2000
Cash interest paid: 730000*10%*6/12 = 36500
Total Interest expense: 36500+2000 = 38500
Q3.
Answer is b. $ 130180
Explanation:
Total ccapital before admission				339000
Capital of new partner				73000
Total capital after admission				412000
New partner capital should be				82400
Less: Actual Capital				73000
Bonus to new partner				9400
Share of Caitlin @30%				2820
Hence, Capital of Caitlin after admission				130180
		(133000-2820)