On January 1st, JK Company issued $400,000, 5-year, 4% bonds. The bonds were sol

Question

On January 1st, JK Company issued $400,000, 5-year, 4% bonds. The bonds were sold at 93. Interest is payable June 30th and December 31st. The entry to record the sale of the bonds would include a: A. Debit to Cash for $400,000 B. Debit to Discount on Bonds Payable for $28,000. C. Credit to Cash for $372,000. D. Credit to Bonds Payable for $372,000. Refer to Question 7. If the JK Company uses the straight-line method to amortize discount on the bonds, the entry to record the first interest payment would include: A. Credit to Cash for $10,800. B. Debit to Interest Expense for 8,000. C. Debit to Interest Expense for $10,800. D. Debit to Discount on Bonds Payable for $2,800. Refer to Questions 7 & 8. What is the "Carrying Value" of the bonds immediately after the first interest payment? A. $372,000 B. $377.600 C. $374,800 D. $400,000 3

Explanation / Answer

1 Discount on bonds payable = 400000-(400000*0.93) = 28000 Debit to discount on bonds payable for $28000 Option B is correct 2 Interest expense 10800          Discount on bonds payable 2800 =28000/10           Cash 8000 =400000*4%/2 Option C is correct 3 Carrying valaue = 372000+2800 = 374800 Option C is correct

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