le Company issued $6000000 of 6%, 10-year bonds on one of its interest dates or

Question

le Company issued $6000000 of 6%, 10-year bonds on one of its interest dates or $5182000 to yield an effective annual rate o 8% The effective n e est method of amortization sto to be recorded at the end of the second year for the payment of interest and the amortization of discount (rounded to the nearest dollar) will include a used he ornalen O credit to Cash for $418925. O credit to Discount on Bonds Payable for $58925 O debit to Bond Interest Expense tor $360000. O credit to Discount on Bonds Payable for $54560.

Explanation / Answer

Year Cash interest Interest expense Discount amortization Carrying value Issue date 5182000 1 360000 414560 54560 5236560 2 360000 418925 58925 5295485 Option 2 credit on discount on bonds payable for $58295 is correct

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