Mayberry, Inc., issued $101,800 of 10 year, 12% bonds dated April 1, 2013, for $
ID: 2489147 • Letter: M
Question
Mayberry, Inc., issued $101,800 of 10 year, 12% bonds dated April 1, 2013, for $107,160 on April 1, 2013. The bonds pay interest annually on April 1. Straight-line amortization is used by the company. What entry is required at April 1, 2014 for the first interest payment? (option !,2,3 or 4)
Mayberry, Inc., issued $101,800 of 10 year, 12% bonds dated April 1, 2013, for $107,160 on April 1, 2013. The bonds pay interest annually on April 1. Straight-line amortization is used by the company. What entry is required at April 1, 2014 for the first interest payment? (option !,2,3 or 4)
Explanation / Answer
premium of $ 5360 is to be used to reduce interest expense over 10 years @ 536 per year (5360/10)
untill then premium on bonds payable will be shown as liability account
entry for interest:-
2nd option is correct
Interest expense (101800*o.12) 12216 particulars debit credit Interest expense 11680 premium on bonds payab le 536 Cash 12216