On January 1, a company issued and sold a $397,000, 5%, 10-year bond payable, an
ID: 2555261 • Letter: O
Question
On January 1, a company issued and sold a $397,000, 5%, 10-year bond payable, and received proceeds of $392,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
Debit Bond Interest Expense $9,675; debit Discount on Bonds Payable $250; credit Cash $9,925.
Debit Bond Interest Expense $9,925; credit Cash $9,925.
Debit Bond Interest Expense $10,175; credit Cash $9,925; credit Discount on Bonds Payable $250.
Debit Bond Interest Expense $9,925; debit Discount on Bonds Payable $250; credit Cash $10,175.
Debit Bond Interest Expense $19,850; credit Cash $19,850.
On January 1, a company issued and sold a $397,000, 5%, 10-year bond payable, and received proceeds of $392,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
Explanation / Answer
First Year
Date : June 30
Debit Bond Interest Expense $9,925; credit Cash $9,925
To record the first interest payment on Bonds payable.
Calculation - $ 397,000 X 5% X6 /12 = $9,925