On January 1, a company issues bonds dated January 1 with a par value of $230,00
ID: 2589091 • Letter: O
Question
On January 1, a company issues bonds dated January 1 with a par value of $230,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $239,811. The journal entry to record the first interest payment using straight-line amortization is:
Debit Bond Interest Expense $7,068.90; debit Discount on Bonds Payable $981.10; credit Cash $8,050.00.
Debit Interest Payable $8,050.00; credit Cash $8,050.00.
Debit Bond Interest Expense $9,031.10; credit Premium on Bonds Payable $981.10; credit Cash $8,050.00.
Debit Bond Interest Expense $9,031.10; credit Discount on Bonds Payable $981.10; credit Cash $8,050.00.
Debit Bond Interest Expense $7,068.90; debit Premium on Bonds Payable $981.10; credit Cash $8,050.00.
On January 1, a company issues bonds dated January 1 with a par value of $230,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $239,811. The journal entry to record the first interest payment using straight-line amortization is:
Explanation / Answer
Bond Interest Expense 7068.9 Premium on Bonds Payable 981.1 =(239811-230000)/10 Cash 8050 =230000*7%/2 Option 5 is correct