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Question
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 8% and the bonds are sold for $312,177. The journal entry to record the first interest payment using the effective interest method of amortization is:
A. Debit Interest Expense $12,487.08; debit Premium on Bonds Payable $1,012.92; credit Cash $13,500.00.
B. Debit Interest Payable $13,500; credit Cash $13,500.00.
C. Debit Interest Expense $12,487.08; debit Discount on Bonds Payable $1,012.92; credit Cash $13,500.00.
D. Debit Interest Expense $14,717.70; credit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.
E. Debit Interest Expense $12,282.30; debit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.
Answer
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Related questions
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Although a fixed budget is only useful over the relevant range of operations, a flexible budget is useful over all possible production levels.
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Use the following information to prepare a budgeted income statement for Arbor Company for the month of June.
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Use the following information to prepare the June cash budget for Arbor Company. It should show expected cash receipts and cash disbursement for the month and the cash balance expected on June 30.
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