Help Seve&Ex; On Jenuary 1, a company issues bonds dated January 1 with a par va
ID: 2431556 • Letter: H
Question
Help Seve&Ex; On Jenuary 1, a company issues bonds dated January 1 with a par value of S230000. The bonds mature in Syears annually on June 30 and December 31. The market rate is 6% and the bonds are sold for $239St. The journal entry to record the fru i terest payment using straight-line amortization is: (Rounded to the nearest dollar) The contract rate 7% and interest is paid Mutuple Choice Debit Interest Payable $8.050, credit Cash $8.050 Debit Bond interest Expense $9.031, credit Premium on Bonds Payable $981, credit Cash $8.050 Debit Bond interest Expense $9.03t, creat Discount on Bonds Payable $981, credt Cash $8050 Debit Bond interest Expense $7069, debt Discount on Bonds Payable $98t credit Cosh $8.050 Deoit Bond interest Expense $7.069 ceot Premum on Bonos Payable s9et. creat Casn s8.050 Pre 19 cr 36 Next> re to search 0Explanation / Answer
Cash interest paid: $230,000 × 0.07 × ½ year = $8,050
Premium amortized: ($239,811 ? $230,000)/5 = $1,962.2 or $1962 , Semi-annually : $1,962÷2 =$981
Interest expense: $8,050 ? $981 = $7,069
Journal Entry:
Dr. Bond Interest Expense $7,069
Dr. Premium on Bonds Payable $981
Cr. Cash $$8,050
Correct answer: 5th Option
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