On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. T
ID: 2593707 • Letter: O
Question
On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 96 resulting in a 4% discount. They had a 20 year term and a stated rate of interest of 7%payable in cash on December 31 of each year. The effective rate of interest was 7.389%. Assuming Residence uses the effective interest rate method, the journal entry necessary to recognize interest expense on the December 31, Year 1 is Credit Debit 3,447 Account Titles Interest Expense 47 Discount on Bonds Payable Cash 3,400 Account Titles Debit Credit 3,500 Interest Expense Discount on Bonds Payable 47 Cash 3,547 Account Titles Debit Credit Interest Expense 3,547 47 Discount on Bonds Payable Cash 3,500 Account Titles Debit Credit Interest Expense 3,547 Cash 3,547Explanation / Answer
As multiple questions have been asked, only 1 can be answered at a time Interest expense 3547 =(50000*0.96)*7.389% Discount on Bonds payable 47 Cash 3500 =50000*7% Option 3 is correct