On January 1, 2014, Tonika Corporation issued a four-year, $10,600, 7% bond. The

Q: On January 1, 2014, Tonika Corporation issued a four-year, $10,600, 7% bond. The

Solution: Date Interest Payment - 7 % Interest Expense - 8% * $ 10,600 Amortization of Bond Discount Debit Balance in Account Credit Balane in Account Book Value of bonds 01/01/2014 632 10,600 9,968 31/12/2014 742 797 55 577 10,600 10,023

ID: 2489137 • Letter: O

Question

On January 1, 2014, Tonika Corporation issued a four-year, $10,600, 7% bond. The interest is payable annually each December 31. The issue price was $9,968 based on an 8% effective interest rate. Assuming the effective-interest amortization is used, and rounding calculations to the nearest whole dollar, which of the following journal entries correctly records the 2014 interest expense? (option 1,2,3 , or 4)

Explanation / Answer

Solution:

Date Interest Payment - 7 % Interest Expense - 8% * $ 10,600 Amortization of Bond Discount Debit Balance in Account Credit Balane in Account Book Value of bonds 01/01/2014 632 10,600 9,968 31/12/2014 742 797 55 577 10,600 10,023

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On January 1, 2014, Tonika Corporation issued a four-year, $10,600, 7% bond. The

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