Weather Corp. issued ten-year, 8%, $100,000 bonds paying interest on an annual b

Question

Weather Corp. issued ten-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium. Which one of the following statements is true? a. Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. b. Weather will receive $94,800 as the issue price. c. The cash paid to bondholders will be $520 each interest period. d. Weather's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year.

Explanation / Answer

journal entry :

so answer is a) Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year.

Date accounts & explanation debit credit Interest expenses a/c 7480 Amortization on premium on bonds payable 520     Cash a/c 8000

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