On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10% and the bonds are sold for $288,413. The journal entry to record the first interest payment using the effective interest method of amortization is:

A. Debit Interest Payable $13,500; credit Cash $13,500.
B. Debit Interest Expense $14,421; credit Premium on Bonds Payable $921; credit Cash $13,500.
C. Debit Interest Expense $12,579; debit Discount on Bonds Payable $921; credit Cash $13,500.
D. Debit Interest Expense $12,579; debit Premium on Bonds Payable $921; credit Cash $13,500.
E. Debit Interest Expense $14,421; credit Discount on Bonds Payable $921; credit Cash $13,500.


Answer: E

Business

You might also like to view...

A __________ is a person or organization that helps another organization sell its goods and services to customers.

a. financier b. supplier c. strategic ally d. distributor e. special-interest group

Business

Profitability is the ability to pay bills when due and to meet unexpected needs for cash

Indicate whether the statement is true or false

Business

Answer the following statements true (T) or false (F)

Environmental conditions are elements beyond managerial control.

Business

The most prominent unions are those whose members are ______ sector employees such as teachers and police officers.

A. public B. private C. business D. service

Business