On January 2, 2004, a corporation issued $200,000, 10%, 10-year bonds for $220,0
ID: 2550913 • Letter: O
Question
On January 2, 2004, a corporation issued $200,000, 10%, 10-year bonds for $220,000. The bonds pay interest each December 31 and the corporation uses the straight-line method to amortize premium or discount. Which of the following would be included in the December 31, 2004 entry to record interest expense? aThe entry would include a credit to cash for $22,000. b The entry would include a credit to premium on bonds payable for $2,000. cThe entry would include a debit to interest expense for $18,000. d The entry would include a debit to interest expense for $22,000.
Explanation / Answer
Answer is a. The entry would include a credit to cash for $22,000. Explanation: JOURNAL ENTRY: Accounts title and explanations Debit $ Credit $ Interest expense Dr. 20000 Premium on Bonds payable Dr. (20,000/10) 2000 Cash Account (220,000*10%) 22000
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