Exhibit 14-10 Hawk issued $500,000 of its ten-year 5% bonds for $463,197 on October 1, 2016 so as to yield an effective rate of 6%. Interest is paid each October 1 and April 1. Refer to Exhibit 14-10. Assuming Hawk uses the effective interest method, the adjusting entry on December 31, 2016, would include (rounded to the nearest dollar)
A) ?a credit to Discount on Bonds Payable for $698.
B) ?a credit to Cash for $6,250.
C) ?a debit to Interest Expense for $5,552.
D) ?a debit to Interest Expense for $5,790.
A
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The effective interest rate on bonds is higher than the stated rate when bonds sell
a. at face value. b. above face value. c. below face value. d. at maturity value.
Which of the following accounts have normal debit balances?
a. Cash b. Dividends c. Accounts Receivable d. All of these are correct
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a. C.I.F. b. delivery ex-ship. c. F.A.S. d. F.O.B.